Thursday, February 25, 2010 Current Valuation 25 Feb 2010
% Face value based on closing price on 2/25/2010
Today was an action packed trading day for all classes of Lehman shares. Prices pushed to valuations not seen since October 2009 and all on tremendous (relative) volume.
Today's action was driven by news of a significant claims reduction ($29B) and corresponding recovery of approximately $8B in illiquid assets.
Approval of Collateral Disposition Agreement with JPMorgan Chase Lehman Reaches Deal on J.P. Morgan Claim
LEHKQ - 12M @ $25 1.56% of face on 497% 10-day average volume LEHLQ - 12M @ $25 1.40% of face on 298% 10-day average volume LEHNQ - 8M @ $25 1.80% of face on 581% 10-day average volume LHHMQ - 16M @ $25 1.4% of face on 325% 10-day average volume
Capital Trusts are trading at an average of 1.54% (+/- 0.19%) of face value nearly doubling since a recent low on 31 DEC 2009. Compared to the Traditional Preferred Shares, CTs are trading at a 291% premium--highest since early to mid October 2009.
LEHCQ - 5M $50 0.40% of face on 916% 10-day average volume LEHDQ - 4M @ $50 0.45% of face on 88% 10-day average volume LEHFQ - 12M @ $25 0.36% of face on 492% 10-day average volume LEHGQ - 5.2M @ $25 0.40% of face on 178% 10-day average volume LEHJQ - 66M @ $25 0.40% of face on 628% 10-day average volume LEHPQ - 4M @ $1000 0.35% of face on 779% 10-day average volume LBHGP - 2M @ $1000 0.26% of face on 1000% 10-day average volume
Traditional Preferred Shares trade at an average of 0.39% (+/- 0.06%) of face value--up 18% off of lows reached on 31 DEC 2009 but still down about 55% from October highs.
LEHMQ closed up 95.47% at $0.1339 on 829% 10-day average volume.
Regarding valuation, on a $25/unit basis, LEHPQ looks the cheapest at $0.0875 cents per $25 unit. Although LBHGP is actually the cheapest per $25 unit, it is nearly impossible to purchase and therefore not considered practical to attempt to accumulate a large position. LEHFQ is trading at $0.09 per unit. The remaining Traditional Preferred Shares are all trading at $0.10 per $25 unit. All bargains in my opinion. Specifically when compared to the price action of Lehman Common shares, LEHMQ.
Todays action in LEHMQ was absolutely unfounded. LEHMQ currently trades at a premium to LEHFQ, LEHGQ, and LEHJQ (in absolute price terms.) When considering the $25 unit comparison, LEHMQ is trading above ALL Preferred shares. This valuation only makes sense if you believe LEHMQ will recover above $25 per share. I do not believe this. The only other explanation is that LEHMQ is being heavily daytraded and not accumulated as other preferred and capital trust shares are. Finally, there are many rumors regarding large short positions in Lehman common shares. There are currently 689M shares outstanding. Shortsqueeze.com indicates only ~12M are currently short.
All Capital Trusts are still well valued considering their ranking in any payout.
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