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Lehman to Raise $6 Billion, Shorts to Remain Entrenched

There’s no doubt that short sellers have piled on to Lehman Brothers Holdings Inc. (LEH) in a big way. This time last year there were just 10.5 million shares short. Then soon after the credit crisis began in the summer months of 2007, that number proceeded to double to 24.2 million shares by the end of August. There has only been a steady net increase in short interest every month since then, with the total now standing at 76.1 million shares, up 21.3% from the last reported number in May. And with today’s news, there is no reason to think the bears will remain anything but entrenched. Lehman expects to report a second quarter loss of $2.8 billion, or $5.14 a share – that’s compared to a profit of $489 million, or 81 cents a share, in same period a year ago. The investment bank also announced that it will raise $6 billion dollars; $4 billion from a public offering of 143 million shares of common stock priced at $28 a share and $2 billion from 2 million shares of convertible preferred stock. With common outstanding shares at 553.6 million, that represents some pretty serious dilution, so yeah, that means Greenlight Capital’s David Einhorn will be sticking around.

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