Lehman says it will raise $3 billion

Lehman Bros. Holdings Inc. said it would raise $3 billion of capital to quash rumors that it was short of cash.

Lehman’s shares fell 2.8% to $36.60 in after-hours trading after the planned offering of convertible preferred stock was announced.

The financial sector is increasingly starved of capital after sustaining huge losses tied to sub-prime mortgages.

Speculation about whether Bear Stearns Cos. had enough capital were enough to force the fifth-largest U.S. investment bank to sell itself for a pittance last month. Lehman Bros., the fourth-largest Wall Street firm, has recently faced similar rumors, which have helped push down its share price more than 40% since February.

News reports have said the Securities and Exchange Commission is looking into whether short-sellers have spread bogus rumors about Lehman to push the company’s share price down. Short-sellers can profit when a company’s stock drops.

Lehman said it had access to more than enough funds, even without the offering. The firm said several large institutional investors had agreed to buy at least $2.5 billion of the preferred stock, which can be converted into common stock.

The sale could put fears about the firm to rest, said Mike Holland at money manager Holland & Co.

“If investors thought there were real problems at Lehman, you couldn’t find buyers for $3 billion of securities at any price,” he said.

But other asset managers said they didn’t understand the rationale for the offering.

“This just makes me scratch my head,” said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. “Why do this if you don’t have to?”