Here’s an excerpt from a NY Times article on an interesting battle between Lehman Brothers and David Einhorn (hedge-fund manager).
Lehman Battles an Insurgent Investor
(Photo: Left: David Einhorn has bet against Lehman. Erin Callan, right: the bank’s chief financial officer, seeks to calm nervous investors.)
By LOUISE STORY
David Einhorn thinks another big Wall Street bank is headed for trouble — and he is not being quiet about it.
Lehman Brothers is not amused. In recent weeks, the bank’s chief financial officer, Erin Callan, has tried privately to rebut Mr. Einhorn to nervous investors, who have feared for Lehman’s health ever since Bear Stearns succumbed to a panic. But despite Ms. Callan’s efforts, Lehman’s stock keeps falling: It tumbled 9.5 percent more on Tuesday, in a deluge of selling, bringing its loss for the last 12 months to 59 percent.
The battle over Lehman has captivated Wall Street and left the bank struggling over what to do next. The bank, which is expected to post a quarterly loss of roughly $1 billion in a few weeks, may also raise capital to shore up investor confidence. The bank has sold more than $100 billion in assets in recent months to shore up its finances, according to a person close to the company. That person said new capital would most likely come from a source other than the public markets.
Mr. Einhorn, who runs a $6 billion hedge fund called Greenlight Capital, has been profiting from the Lehman’s growing pain. Critics say he is needlessly fanning fears about the precarious health of the financial industry at the very moment executives are struggling to stabilize their ailing companies. Many on Wall Street still wonder if hedge funds like Greenlight helped bring down Bear Stearns and spread false rumors about the bank, a possibility the Securities and Exchange Commission is investigating…
Within Lehman, workers are calling Mr. Einhorn’s strategy “short and distort.” Many hedge fund managers talk freely with one another about companies, but they typically shun publicity. Mr. Einhorn, by contrast, is working with a financial public relations firm, the Gordon Group, to promote his book and views on stocks.
“His position on shorting Lehman is only going to get traction and be successful if he can succeed in convincing people to drive down the stock,” said Michael Claes, a managing director at the public relations firm Burson-Marsteller. “That’s best accomplished with media exposure.”…" For more, click here.
