-- Q: Lehman Bros. lehmq filed for Chapter 11 bankruptcy protection. So, why isn't the share price zero?
A: Storied investment bank Lehman Bros. has been one of the biggest losers in the financial crisis so far. While the government chose to bail out Fannie Mae, Freddie Mac and American International Group, Lehman was left to fail.
The ripple effects of destruction resulting from Lehman's collapse continue to shake markets. The failure of Lehman, for instance, is a big reason why The Reserve liquidated its Primary money market fund. Thet fund, one of the nation's biggest and oldest, owned Lehman bonds that were revalued by The Reserve as worthless. That caused the fund to be worth less than $1 a share and caused investors to panic and try to redeem their shares.
But that's only half the story of the pain resulting from Lehman's failure. Stock investors in Lehman have also suffered. Shares crashed from their high of $84.13 in January 2007 to about 15 cents.
You're right, 15 cents isn't zero. But, it's awfully close. Since Lehman's shares have been kicked off the New York Stock Exchange, it is really now in the hands of penny stock operators, speculators and uninformed gamblers. I suppose there's a glimmer of hope that Lehman will somehow be resurrected or maybe find some sort of value in the ashes.
Don't believe it. In nearly all these cases, investors again and again end up with nothing and the common stock is canceled in the bankruptcy proceedings. If you want to gamble, go to Las Vegas or Atlantic City. At least, you might get a free beer or tickets to a show.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at email@example.com. Click here to see previous Ask Matt columns.