Finance and Economic

Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) raised $4 billion of capital on Tuesday in a preferred stock deal designed to stop questions about the Wall Street investment bank’s stability.

Lehman’s shares rose 17.8 percent as investors snapped up the offering, quelling rumors of looming write-downs that had left some worried Lehman could face a run on the bank similar to the one suffered by Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research).

“The deal appeared to have gone pretty well. People feel comfortable with Lehman, unlike the situation around Bear Stearns,” said Lee Delaporte, director of research at Dreman Value Management.

Investors have been jittery about investment banks, and particularly Lehman, after Bear’s demise and more than $200 billion of write-downs industrywide tied to subprime mortgages and other toxic assets.

But Lehman’s convertible preferred deal allayed fears about the financial sector, and lifted U.S. stocks more than 3 percent fast cash advance. At the same time, prices dropped on U.S. Treasury debt, which is often seen as a safe haven in stormy markets.

In addition to the Lehman deal, UBS AG (UBSN.VX: Quote, Profile, Research) and Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research) said they would record more than $23 billion of write-downs, pushing European financial stocks dramatically higher. Investors saw the write-downs as a signal that banks are getting their problems behind them.

Still, some question whether Lehman has written down enough of its $73.4 billion of mortgage and real estate assets. Lehman has said its valuation measures are fair.

Lehman suspects short sellers have spread false rumors about the company to profit from share declines. The company said last month that it has nearly $100 billion of assets at its holding company that could be easily sold or borrowed against. 

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