Lehman pre-announcement: The Brothers bear bad news

Lehman Brothers pre-released details of their earnings announcement originally scheduled for next Monday.  The company attempted to soften the blow of a larger than expected $2.8 billion loss with the announcement of plans to raise $6 billion in capital.

For a company that has proclaimed its financial well-being in recent weeks, raising $6 billion in capital may not be viewed in the most positive light.  The terms of the new issue are even less flattering.  The company plans to raise $4 billion of those dollars through the issuance of 143 million shares of common stock.  

Herein lies the problem: The new issue calls for 143 million shares valued at $4 billion, which is $27.97 per share BUT shares of Lehman closed above $32 on Friday.  Why the 13% discount?

What message is sent to investors when a company values new shares less than existing ones?  Not a good one, shares of Lehman Brothers were down over nine percent heading into mid-day trading hours. 

Perhaps the June 16th announcement will shed more light on the recent developments.