Lehman Plummets Anew on Downgrades

Lehman Brothers (LEH Quote) shares were free falling again in premarket trading Thursday, as the reeling investment bank failed to impress analysts the day before to shore up its balance sheet.

Goldman Sachs, Oppenheimer & Co., Banc of America Securities and Citigroup all downgraded Lehman Thursday morning, a day after the firm unveiled plans to sell a majority stake in its asset management business, spin off its commercial real-estate assets into a new publicly-traded company and cut its annual dividend to 5 cents a share from 68 cents.

"Management did not successfully put to rest the issues that had been pressuring the stock," Goldman analyst William Tanona wrote.

Lehman shares were down more than 40% to $4.26 before the open, signaling it was well on its way to a fourth straight day of losses. Since closing trading at $16.20 on Sept. 5, Lehman Brothers has shed 55% to close at $7.25 on Wednesday. Shares are off 89% from their 52-week high.

Fears that Lehman could suffer the fate of Bear Stearns -- which federal officials forced to sell itself at a cut rate $10 per share to JPMorgan Chase (JPM Quote) in March -- have been behind the selloff. Like Bear, Lehman's fortunes are strongly connected to the real estate and fixed income markets, which has been at the center of the current economic crisis.

Brad Hintz, analyst with Sanford Bernstein, believes those fears are significantly lessened by the fact that Lehman has the ability to borrow funds from the Federal Reserve, which Bear did not. The Fed gave investment banks the ability to borrow directly from the federal government at a discount in March, shortly after JPMorgan agreed to acquire Bear.