Lehman shares plunge on capital raising concern

By Dan Wilchins

NEW YORK (Reuters) - Lehman Brothers Holdings Inc LEH.N shares plunged as much as 14 percent on Tuesday to their lowest level since the meltdown of Bear Stearns on concern that Wall Street's smallest surviving major brokerage could need to raise more capital.

Lehman Brothers spokeswoman Kerrie Cohen declined to comment on a report in The Wall Street Journal that Lehman was considering raising billions of dollars in fresh capital.

A source familiar with the situation said Lehman had no need to raise capital and would only do so if the right market opportunity presented itself, or if the firm thought it would help investor perceptions. The source said a move to raise capital was only one of "dozens" of options for the investment bank.

The rout in Lehman shares dragged the broader market lower, and the Standard & Poor's Financials index .GSPF was on track for its lowest close since the broader market's 2008 low of March 17 -- the day JPMorgan Chase & Co (JPM.N) agreed to buy Bear Stearns at a fire sale price of $2 a share, later revised upward to $10.

"People are very leery of not having to go through another Bear Stearns type situation with Lehman Brothers," said Michael James senior trader at regional investment bank Wedbush Morgan in Los Angeles. "It's a fear factor thing. There may be nothing behind it, but there's a sell now, ask questions later mentality."

The newspaper quoted analysts and Wall Street executives as saying Lehman was likely to seek $3 billion to $4 billion. The Journal said the plans suggest the investment bank would post a loss for the second quarter ended in May deeper than the $300 million that various analysts have been expecting.

Some analysts said there was no urgent need for Lehman to further bolster its balance sheet.

"In our view, there is no immediate need to raise equity capital, and the company would only take this painful step in an effort to cease the drumbeat of negative perceptions," David Trone, an analyst for Fox-Pitt, Kelton, wrote in a research note.