Lehman: Where Were the Analyst 'Sell' Calls?

How can investors trust analysts who can't tell the difference between a company that's solvent and one that is worth virtually nothing to shareholders? We've seen other examples where analysts appear fraudulent in their recommendations. The latest example? That of Lehman Brothers (LEH).

Yesterday, the company filed for bankruptcy, and the share price lost 95% of its value. However, rumours have persisted for months that this bank is due to fail. The company has been desperately trying to sell off assets to raise cash to remain solvent, but last week it appeared their last-ditch efforts had failed.

Yet on the Friday (Sept 12th) before the imminent bankruptcy, here is a summary of the recommendations of the 19 analysts that were covering LEH according to Thompson/First Call:



There is not a single 'Sell' rating on this chart! So are the analysts just guessing? One would think that if they were, then surely at least one analyst out of nineteen would rate this a sell. Were some of these ratings made months ago? Perhaps, but they are nevertheless still current (and not listed as suspended). In fact, three days before the would-be bankruptcy was announced, both Citigroup and Argus downgraded LEH from 'Buy' to 'Hold'. Hold?! Not 'Sell'? Does this industry have any credibility?

Comments

[cvillelb:]

Somehow Lehman itself managed to issue a downgrade of ThomsonReuters news service this morning; down 3%.

2008 Sep 16 09:54 AM

[User 263404:]

thank you Saj for an eye opening observation. The analyst community has no credibility as far as i am concerned.

2008 Sep 16 10:04 AM

[venividivici:]

NO. They are simply paid cheerleaders for the industry. Nothing more.

2008 Sep 16 10:37 AM

[vidcrayzee:]

George Bush has something humorous to say about Lehman’s woes. Check out the video here, beema.wordpress.com/20.../. If you can’t laugh you will most definitely cry about all of this.

2008 Sep 16 10:49 AM