Investors, anxious about the possibility of a bank failure after the near-collapse of Bear Stearns in March, punished the stock. Shares plunged $6.36, or 45 percent, to $7.79 -- the lowest level Lehman's stock has hit since the financial meltdown of 1998 triggered by the collapse of hedge fund Long-Term Capital Management.
The nation's fourth-largest securities firm has been seeking to boost liquidity after suffering $8.2 billion in write-downs and credit losses since the financial crisis began last year. Lehman had hoped to find a major investor before announcing third-quarter results Sept. 18, when it is widely expected to take another round of steep losses.
Uncertainty about Lehman's financial position has prompted speculation that the investment bank might announce quarterly results early, a move that could stem the stock's slide. Prashant Bhatia, an analyst with Citigroup, said Lehman could release details about the third quarter in the next day or so.
Lehman could report a loss of between $2 billion and $4 billion, according to analysts. That would be on top of a $2.8 billion second-quarter loss.
The steep decline in Lehman's shares began shortly after Dow Jones Newswires reported that the head of South Korea's financial regulator said talks about a possible investment had ended. Lehman Chief Executive Richard Fuld had been in negotiations with state-owned Korea Development Bank for several weeks about a capital infusion.
That report is being disputed. Yoo Jae-hoon, a spokesman for South Korea's Financial Services Commission, denied any such statement was made.