Lehman to Raise $6 Billion, Shares Plummet

Updated from 12:53 p.m. EDT

Lehman Brothers(LEH Quote) on Monday warned it would post a $2.8 billion second-quarter loss and said it would raise $6 billion through common and preferred stock offerings.

The loss comes to $5.14 per diluted common share, vs. a profit of $1.3 billion, or $2.21 per diluted common share, in the second quarter of last year. Analysts polled by Thomson Reuters had expected a loss of 22 cents a share in the second quarter.

"[Monday's] results were far worse than anyone had anticipated," wrote Goldman Sachs analyst Bill Tanona in a research report following the announcement.

Lehman Brothers expects negative revenue of $700 million, compared to positive revenue of $5.5 billion in the year-ago period. Analysts had expected revenue of $2.62 billion. The second-quarter results reflect negative mark-to-market adjustments and principal trading losses, as well as rising debt liabilities. The firm also said it incurred losses on hedges this quarter "more than offset" gains from some hedging activity.

"I am very disappointed in this quarter's results," Chairman and CEO Richard Fuld said in company statement. "Notwithstanding the solid underlying performance of our client franchise, we had our first-ever quarterly loss as a public company. However, with our strengthened balance sheet and the improvement in the financial markets since March, we are well-positioned to serve our clients and execute our strategy."

Lehman Taps More Liquidity

Lehman plans to issue 143 million shares of common stock for $28 apiece. The firm is selling $2 billion worth of preferred shares that will carry an 8.75% yield and be convertible into common stock in a price range between $28 and $33 each, according to a Securities and Exchange Commission filing. The preferred shares will be converted to common stock after three years, with cash provided in lieu of fractional shares, the company said.