Chapter 842 Lehman Moment

The New York Economic Institute has not made any achievements since its establishment.

At the beginning, Summers was very interested and wanted to take the pulse of the American social economy to show his ability as an economist inherited from Summers.

However, after taking the pulse, he suddenly became indecisive, unable to see the situation clearly and discern the thread. The research report originally scheduled for the first quarter was delayed, and he himself became a little bored because of this delay.

When Fang Zhuo gave a suggestion to "analyze Lehman", Summers was still not interested, but agreed to do it and handed the project to someone from Harvard Business School.

This research report on Lehman was originally carried out normally, but as industry insiders provided quite detailed and reliable data and industry changes over the past few months, things gradually became interesting.

Today's housing market is in a bloody storm due to the default of subprime debt.

The wave of collapse of housing subprime mortgage institutions that began in March affected the fifth largest investment bank in the United States, Bear Stearns, in August, and its two funds declared bankruptcy.

At the same time, Lehman's stock price once reached a high of $72.

The reason why the capital market reacted in this way is precisely because Lehman has made frequent moves in commercial real estate this year, with investment hitting new highs, and related bond issuances are very popular. In particular, it leveraged in May and joined other institutions to spend a huge amount of money to acquire Axton, the second largest high-end apartment developer in the United States.

The amount of this acquisition is as high as $22.2 billion.

Stimulated by this, the capital market believes that Lehman's construction around commercial real estate is quite successful, which is different from institutions such as Bear Stearns, Citigroup, and Merrill Lynch that frequently reported unfavorable news.

Lehman's stock price rose against the trend.

The problem is that the acquisition that was reported in May was not announced until August.

In these four months, the subprime crisis and the credit crisis caused changes in the plate of commercial real estate and related mortgage securities, and Lehman lost its sales of commercial mortgage securities issued by the Axton project.

The original customers are increasingly tightening their wallets due to market changes.

Lehman's commercial mortgage securities CMBS can no longer flow!

It was at this time that the "New York Institute for Economic and Social Development" issued its first research report since its establishment, analyzing Lehman's failure in commercial real estate and using this case to issue a stern warning to the US financial market.

——Lehman has serious problems, and this problem is likely to be just a microcosm of the financial market!

——The United States must be vigilant against the systemic financial risks brought about by the subprime mortgage problem!

The Lehman case was handled by people from Harvard Business School. Summers was re-interested in the case and was determined to give a warning.

However, "systemic financial risks" are far less eye-catching than "Lehman problems."

The data in this New York Economics research report is very professional. The funds, leverage, process, and problems of Lehman's acquisition of Axton are described quite expertly. Many figures have caused some institutions to question Lehman in the current environment.

——A $22.2 billion acquisition case, the New York Economics speculated that Lehman itself actually paid less than $300 million!

——The leverage ratio exceeds 40:1!

Then, once this huge commercial real estate project was in hand, the notes, bank financing, commercial mortgage debt, equity bridge loans in the leverage... all turned into ropes to tightly strangle Lehman's neck!

Did this project really fall into hand?

The New York Economics report quoted insiders...

- "Lehman is frantically making concessions to cash out. They are even negotiating prices of 10%, 20%, and 30%. It's crazy, it's already crazy!"

- "No one dares to buy CMBS issued by Lehman anymore. They are all afraid of Lehman's default."

- "Walsh, who is in charge of this project at Lehman, called me and said that Lehman is willing to bear the default risk of the first $5 billion, but I still don't dare to take it. I'm afraid that this time it will be a $10 billion default, and the loss of the next $5 billion will be enough to make me jump off the building!"

From industry changes, funding data to project facts and insider revelations, the New York Economics research report has restored Lehman's predicament in commercial real estate and CMBS in high definition.

Lehman's stock price took a big dive due to this!

The stock price fell from $72 to $56 in a short period of time, a drop of 22.2%!

Lehman held an emergency press conference to deny the NYSE research report and denounced it as a false smear.

Subsequently, the bulls launched a counterattack and the stock price rebounded to $65.

However, before the NYSE, which issued the report, could respond, Goldman Sachs suddenly spoke out, believing that the liquidity crisis caused by the default of subprime bonds had led to substantial instability in the commercial real estate securities market.

The NYSE reported, Goldman Sachs spoke out, and more institutions expressed their views to varying degrees.

The stock market voted with its feet, and Lehman's stock price fell again, from $65 to $49, and finally rebounded slightly to the $50 mark.

Compared with the high of 72, as of Fang Zhuo's invitation to Stanford, Lehman's stock price was 50.65, a drop of nearly 30%!

An international investment bank lost 30% of its market value in a short period of time, and it was precisely the commercial real estate project that was previously known as a market model that led to its situation.

Everything that happened in a short period of time, when Fang Zhuo stood in the classroom of Stanford Business School, when he was asked about something that seemed to have some connection with him at the moment, he first sighed from the bottom of his heart.

"Exciting."

This is also the common feeling of the teachers and students in the business school who came to listen to the guests share their business experience today. Lehman's strengths became weaknesses, profits turned into losses, and the high stock price plummeted. This is too exciting!

However, Fang Zhuo also felt that there was something exciting that was not disclosed in the research report.

The money used by Lehman to acquire Axton came from Fannie Mae and Freddie Mac, the two largest housing mortgage institutions in the United States.

Kong Yu has already started shorting the two houses and has been increasing their positions depending on the situation. He never expected that this observation of Lehman would also involve Fannie Mae and Freddie Mac.

It can only be said that Lehman is indeed strong and has strong connections.

"Mr. Fang, I heard that you were shorting Lehman before, and the New York Institute of Economics, which issued a research report on Lehman this time, also had your sponsorship. Can I understand that this is your sniping against Lehman?" A student asked a question that also attracted much attention.

Fang Zhuo was very calm: "Before Lehman was exposed, did you also think that its commercial real estate projects were excellent? If there was no report, would the excellent Lehman be the truth you think it is?"

"Similarly, I did sponsor the New York Economic Review, because Summers is an economist I respect very much, but, classmates, I am not the only one who sponsored this institution. Are other sponsors also sniping Lehman?"

"The New York Economic Review is an objective and independent third-party institution. I look forward to it providing us with a deeper perspective."

The New York Economic Review is sponsored by Fang Zhuo, but only one sponsor is too conspicuous, so the New York Economic Review has some alms, so that he will be very comfortable with more sponsors.

Fang Zhuo continued to respond: "I shorted Lehman without hiding it, and I would not be afraid to admit that I would snipe Lehman, but there is nothing, and I don't need to deny anything."

There is no need to deny anything for yourself, but since the New York Economic Review has this demand, Fang Zhuo also took the responsibility. He was denying for the New York Economic Review.

Applause broke out in the business school, and everyone felt that the world's top 50 richest people were very sincere.

"Mr. Fang, many media have called Lehman's stock price drop the 'Lehman moment'. What do you think of Lehman's prospects?" someone asked.

Fang Zhuo laughed when he heard this question.

"You shouldn't ask such a question to someone who shorted Lehman."

"Lehman moment?"

"No, I don't think it's Lehman's moment now. It's just the beginning of Lehman."

Fang Zhuo made a vested interest prediction: "Trapped by business pressure, capital pressure, and environmental pressure at multiple levels, when the stock price starts to fall, the real Lehman moment will not be far away."