{ "docId": "019dd923-622b-71dc-a6da-d663f7d16bb8", "docSlug": "6b632aa627e3", "documentTitle": "Lehman Brothers (LEH)", "authorId": "04_Greenlight_Capital", "authorName": "David Einhorn", "documentKindSlug": "conference-presentation", "documentKindLabel": "Conference presentation", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2008-05-21 00:00:00", "orientation": "portrait", "aspectRatio": 0.7428985, "pageNumber": 9, "pageCount": 9, "prevPage": 8, "nextPage": null, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "This appears to be a page from a report or presentation criticizing Lehman Brothers' financial disclosures.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6da-d663f7d16bb8/9", "deckHref": "/decks/019dd923-622b-71dc-a6da-d663f7d16bb8", "deckJsonHref": "/decks/019dd923-622b-71dc-a6da-d663f7d16bb8.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6da-d663f7d16bb8#slide-9", "components": [ { "bbox": null, "kind": "callout", "text": "My hope is that Mr. Cox and Mr. Paulson will pay heed to the risks to the financial system that Lehman is creating and that they will guide Lehman toward a recapitalization and recognition of its losses – hopefully before federal taxpayer assistance is required.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0936-7173-ab16-0b1e199042a5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.72, "x": 0.14, "y": 0.61 }, "kind": "paragraph", "text": "I think that there is enough evidence to show how Lehman answered the difficult question as to whether to tell the truth and suffer the consequences or not. This raises the question, though, of what incentive do corporate managers have to fully acknowledge bad news in a truthful fashion?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "33a9cf44-f1fb-48a7-aa6e-8dbd31f753e0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.54 }, "kind": "paragraph", "text": "For the last several weeks, Lehman has been complaining about short-sellers. Academic research and our experience indicate that when management teams do that, it is a sign that management is attempting to distract investors from serious problems.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4a036528-40f7-45f4-8814-a822d29d797c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.72, "x": 0.14, "y": 0.27 }, "kind": "paragraph", "text": "Recently, Lehman analysts have been cutting second quarter estimates due to \"hedge ineffectiveness.\" According to Lehman, hedges that mitigated the gross losses previously are now reversing faster than the assets Lehman owns. It seems to me that the hedge ineffectiveness might reflect Lehman more aggressively recognizing the gains on its hedges than the losses on its assets in prior periods.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4f7dfac7-f930-4e13-8ec3-b2cf9294888c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.72, "x": 0.14, "y": 0.08 }, "kind": "paragraph", "text": "further. Since Lehman's portfolio is less than AAA, it would seem its write-down probably should have been more than 10 points. Lehman wrote its exposure down less than 3 points gross.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7d48ed42-f442-4257-996a-454cf10b9ca0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.14, "w": 0.72, "x": 0.14, "y": 0.69 }, "kind": "paragraph", "text": "For the capital markets to function, companies need to provide investors with accurate information rather than whatever numbers add up to a smooth return. If there is no penalty for misbehavior - and, in fact, such behavior is rewarded with flattering stories in the mainstream press about how to handle a crisis – we will all bear the negative consequences over time. At a minimum, what message does this send to some of Lehman's competitors that probably didn't have problems quite as acute as Lehman, but who took sizable write-downs, and diluted their shareholders with significant equity raises?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ae5992fb-4940-4392-b0d2-cfa27bc470a4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.72, "x": 0.14, "y": 0.46 }, "kind": "paragraph", "text": "My hope is that Mr. Cox and Mr. Paulson will pay heed to the risks to the financial system that Lehman is creating and that they will guide Lehman toward a recapitalization and recognition of its losses – hopefully before federal taxpayer assistance is required.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "aedc8ba9-9cd3-46a4-899b-8ff74529a943", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.14 }, "kind": "paragraph", "text": "Part of the commercial mortgage exposure is a venture called SunCal, where Lehman is a lender and equity investor. SunCal is a large land developer, principally in California's Inland Empire. This is one of the hardest hit housing markets in the country. A number of publicly-traded home builders have written land holdings in this area down to pennies on the dollar. Lehman has not disclosed a material charge on its SunCal investment.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c34b050b-340b-4035-805d-8bd9d5403691", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.84 }, "kind": "paragraph", "text": "Now, given my experience with Allied and the SEC, I have no expectation that Lehman will be sanctioned in any material way for what we believe it has done. I suspect that some of the authorities applaud Lehman's accounting ingenuity.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c81fcded-551e-4c03-8019-878cbaad459d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.39 }, "kind": "paragraph", "text": "At the Grant's Conference, before Lehman filed its 10-Q, I argued that if you assumed Lehman's balance sheet was accurate, it needed to de-lever and raise capital. Now, I believe the need is much greater.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e10c006d-6ffc-476d-97a7-a0b43549d41d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.4, "x": 0.14, "y": 0.95 }, "kind": "source-note", "text": "FOIA CONFIDENTIAL TREATMENT REQUESTED BY LEHMAN BROTHERS HOLDINGS INC.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "35ee04af-751f-48a3-b8f6-7a1ff00fae6f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.16, "x": 0.7, "y": 0.95 }, "kind": "source-note", "text": "LBHI_SEC07940_336854", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b748eb1a-4e0b-4a9e-b198-56bc553330a7", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }