Shares of Lehman Brothers Holdings Inc. continued to climb for the third straight day Thursday after shares fell sharply Monday amid speculation the investment bank might be bought out at a discount price by Barclays PLC.
Lehman rose 2.2 percent to close at $22.85 Thursday, adding to Tuesday and Wednesday gains, which totaled about 13 percent.
"Once people started to look closely at Lehman, they see its in pretty good shape," Ladenburg Thalmann analyst Richard Bove said. Much of Lehman's operations are expanding, Bove noted, including its mergers and acquisitions business.
Lehman shares tumbled 11 percent Monday amid speculation Barclays was going to buy the investment bank at a discount. Bove said the price floated was $15 per share.
Monday's plunge was built solely on a rumor likely started by short sellers, and investors have taken to believing nearly any negative rumor about a bank, Bove said.
"The rumor had legs," Bove said, adding that few stopped to consider the validity of the potential deal.
Lehman Brothers did not immediately return calls Thursday afternoon seeking comment on the takeover rumor but on Monday declined to comment on it.
Like most other investment banks, Lehman's shares have been steadily declining amid continued turmoil in the credit and mortgage markets. Shares traded as high as $66.58 as recently as February, but have been falling steadily ever since.
Lehman shares took a sharp plunge in March around the time of Bear Stearns collapsed. Market speculation pointed toward Lehman being the next victim of the credit market fallout. Shares rebounded from that drop temporarily after the company reassured investors it was financially sound, but shares quickly trended lower again.
In June, Lehman said it lost $2.87 billion during its fiscal second quarter, which ended May 31. Lehman raised $6 billion of fresh capital the same week it announced the loss and demoted its chief financial officer and chief operating officer in an attempt to improve operations.
Investment banks and other financial services firms almost universally have seen profits plunge or reported outright losses since the middle of 2007 as deterioration in the credit and mortgage markets.
As defaults on mortgages skyrocketed in 2007, securities backed by the troubled loans quickly lost their value. Seeing those declines, investors shied away from purchasing all but the safest kind of debt. That left banks such as Lehman reducing the value of their holdings in mortgage-backed securities and other debt.
Lehman has taken about $7.6 billion in write-downs since the middle of 2007, with nearly half of them coming during its second quarter.
Terms & Conditions
RSS Headlines
Fool UK