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Fortune reports that Lehman Brothers Holdings (NYSE: LEH) reported a $2.8 billion loss this morning. This $5.14 a share loss far exceeds the 22 cents a share that analysts were expecting. Thanks to mark-to-market asset write-downs and trading losses, Lehman posted revenue of negative $668 million in the latest quarter from $5.51 billion a year earlier.
The good news is that it reduced its leverage. Now it's only borrowing 12.5 dollars for every dollar of net equity compared 15.4 at the end of the first quarter. Lehman said it cut net assets by $60 billion in the latest quarter. And it plans to raise $6 billion in new equity -- a combination of common and preferred stock.
It's unclear why anyone would want to catch this falling knife. But those who do will demand a high price. And since Moody's (NYSE: MCO) is now cutting its outlook on Lehman to negative, it should be no big surprise that Lehman shares are down 10% in pre-market.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned
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