Toomre Capital Markets LLC

Late on Sunday June 8^th 2008, The Wall Street Journal is reporting Lehman Set To Raise $5 Billion Amid Losses. Supposedly the equity offering will be placed primarily with United States institutional investors, including the State of New Jersey Division of Investment. What is most interesting about the article though is that Lehman Brothers' second quarter loss is expected to exceed $2 billion, much more than the market consensus of a $300 million. Such a number, if true, makes it highly likely that the Lehman Brothers common stock will likely open down again on Monday morning. Such a decline tied both to a bigger than expected quarterly loss as well as the dilution from a secondary stock offering will make it much more difficult to price a big common stock offering.

Toomre Capital Markets LLC ("TCM") hopes that Lehman Brothers can succeed in placing the $5 billion in equity. While it will be highly dilutive to existing shareholders, such a capital raise should ensure that Lehman Brothers will be able to continue as an on-going entity, particularly in the fixed-income markets where their credit rating is critically important both for funding needs and the derivatives businesses. One might remember that a significant portion of the common equity currently is owned by the employees of Lehman Brothers who have seen the value of their holdings decline by close to fifty percent since the start of the year. Those employees might well be asking how Lehman Brothers allowed itself to get so off-sides to own some $80 billion odd in mortgages securities at the start of this credit crunch.