- The Washington Times - Thursday, September 11, 2008

NEW YORK (AP) – Shares of Lehman Brothers Holdings Inc. fell about 40 percent in morning trading Thursday as analysts voiced doubts about the storied Wall Street firm plans to sell off assets in a last-ditch effort to survive.

Shares dropped $2.96 to $4.29 in morning trading after sinking to a new 52-week low of $4.07 earlier in the session. A day earlier, the stock lost 54 cents to close at $7.25, a negative reaction to the 158-year-old investment bank’s plan to sell a stake in its investment management unit and spin off its commercial real estate assets.

Lehman also slashed its dividend and reported a loss of $3.9 billion for its fiscal third quarter.

Related story: PATRICE HILL/Lehman Bros. gamble on oil fizzles

Citi Investment Research analyst Prashant A. Bhatia cut his rating on the shares to “Hold” from “Buy” and slashed his target price to $9 from $35.

While Bhatia is encouraged by Lehman’s strategy, he believes raising capital would have helped offset some of the “perception issues” and given management more flexibility to execute its plan.

“Looking at Lehman solely on fundamentals, it has significant upside, but this is a side issue compared to perception and confidence issues,” Bhatia wrote in a note to clients.

Goldman Sachs analyst William Tanona also downgraded Lehman shares to “Neutral” from “Buy.” He had hoped the firm would find a strategic partner that could provide some balance sheet support.

Lehman’s current crisis came to a head on Tuesday when its shares plunged almost 45 percent after reports that the head of South Korea’s financial regulator said talks about a possible investment had ended. Lehman had been in negotiations with state-owned Korea Development Bank for several weeks about a capital infusion.

“Management did not successfully put to rest the issues that had been pressuring the stock,” Tanona wrote, “and with significant uncertainty remaining about the firm’s future initiatives, we moved to a ‘Neutral’ rating.”

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