Short-Seller Einhorn Takes Lehman To Task
According to Fortune magazine, hedge fund manager David Einhorn, who is betting against Lehman by selling its stock short, recently gave a speech in which he renewed questions about the quality of the firm’s first-quarter earnings report.
Even though the market accepted Lehman’s report when it came out in March, Einhorn has questioned Lehman’s outsized unrealized gain on an equity investment and wondered why the firm had not taken larger writedowns on its holdings of collateralized debt obligations (CDOs).
The firm rejects the notion that it has any accounting issues and says that Einhorn “cherry-picks certain specific items from our quarterly filing and takes them out of context and distorts them to relay a false impression of the firm’s financial condition which suits him.”
Lehman is looking at $1.5 to $2 billion in second-quarter losses on failed hedging transactions and asset write-downs. Ladenburg Thalmann analyst Dick Bove has downgraded Lehman and two other investment banks and expects their stock to drop 15% to 20% from current levels. Bove says that Lehman is the investment bank that is “the most vulnerable” to suffering a Bear Stearns–like liquidity problem.
