Fox-Pitt says full short-sale curb will help Lehman shares
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Wed, 16 Jul 2008 13:55:00 GMT |
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(Reuters) - Lehman Brothers' shares will benefit if U.S. securities regulators fully restricted short selling, Fox-Pitt Kelton analysts said.Shares of the fourth-largest U.S. investment bank have seen wild swings recently, plunging 80 percent this year, as investors were concerned over the liquidity and capital position of the bank.The U.S. Securities and Exchange Commission issued an emergency rule on Tuesday, limiting certain types of short selling in 19 major financial firms, including Lehman Brothers."While the SEC plan falls short of an outright prohibition, it should help relieve some of the artificial pressure, and panic threat," Fox-Pitt analysts said.If the short-term efforts fail, the SEC could quickly adopt the full restriction, which would end rumor-mongering and significantly reduce the threat of counterparty/creditor panic, they said."Once that is achieved, the investment case in Lehman would revert back to pure fundamentals, and we believe the company's results will prove dramatically better than the current price implies," the analysts said.Short sellers arrange to borrow shares they consider overvalued and sell them in hopes of making profit when the price drops.With financial stocks dropping dramatically over the year, lawmakers have been calling on the SEC to investigate whether short sellers and speculators are behind the move.The agency's rule change would prevent investors from making "naked" short sales of the biggest financial stocks. A "naked" short sale occurs when an investor sells stock that has not yet been borrowed.Lehman shares were up 5 percent at $13.88 in morning trade on the New York Stock Exchange.(Reporting by Supantha Mukherjee in Bangalore; Editing by Vinu Pilakkott)
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