News of an impending buyout is usually some of the best news investors can hear. Share prices typically rise in anticipation of an offer coming in at a premium, and can sometimes soar even higher if investors think a bidding war will ensue.
But as we've learned in recent months, when it comes to gossip, Lehman seems to always find itself on the rotten end of the rumor mill.
Shares tanked around 11% Monday on rumors that British bank Barclays
Rumors and gossip aside, some critical questions have to be addressed before Lehman could be picked up at these battered prices. Here're just a few.
Shareholders are already fuming
When JPMorgan Chase
With Lehman shareholders already a bit peeved by short-seller attacks and a constant barrage of rumors about its ability to survive, it's unlikely they'll accept an offer that comes in at astonishingly low levels.
What would happen to financial markets?
By many measures, the period right around when Bear Stearns flatlined marked a capitulation of confidence and a crescendo of fear.
If yet another massive bank like Lehman came crashing down, the amount of uncertainty might be too much for the market to handle, causing another downward spiral of fear that could mean some serious trouble for market and consumer confidence. In what would normally be seen as a vote of confidence, a Barclays takeover might be seen as an attempt to save a bank that can't stand on its own.
What does Barclays see in Lehman?
With big bank stocks like Citigroup
It's quite a coin toss
Lehman's likely in one of two positions: It's either absurdly cheap, or it's on its way out. From that point of view, a buyout at anything near these prices could be a severe slap in the face, or one of the last remaining hopes.
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