Lehman Shares Jump Again

Lehman Brothers (LEH Quote) saw its stock rise sharply Thursday behind a report from Deutsche Bank analyst Mike Mayo, dismissing the possibility that the investment bank will fail.

Lehman shares recently were up 9.3% to $34.31, as it rallied a second straight day. The stock had fallen as much as 24% this week, amid concerns about the bank's capital level that echoed the downfall of Bear Stearns. Such fears, Mayo writes, reflect "an exaggeration of many of the concerns that have been around for the past couple months."

Mayo says he expects Lehman to raise some $4 billion in equity, in order to counter fears that have caused the cost of insuring Lehman's debt against default to rise. Lehman also received a ratings downgrade from Standard & Poor's three days ago, as did competitors Merrill Lynch(MER Quote) and Morgan Stanley (MS Quote). Nonetheless, Mayo says "liquidity is not a major issue" for Lehman, and he believes revenues will continue to grow for the brokerage house.

Cramer: No Reason to Own Lehman

Because it has a business model comparable to Bear Stearns, which had to be rescued by the Federal Reserve and sold at a cut rate price to JPMorgan Chase(JPM Quote) in a deal that Bear shareholders approved last week, Lehman is seen by many investors who have a bearish view of the markets in general as the logical next shoe to drop.

Lehman's stock cratered in March on the same concerns, which have been revived in recent weeks for reasons that are difficult to pinpoint. Mayo argues in his report that "not so much has changed" since May 5, when he published his last analysis of Lehman. On that day, Lehman's stock closed at $45.63, well above its level of $31.40 closing price on Wednesday.