Richard Fuld, Lehman's embattled chief executive, does not know whether the news of Lehman Bros share price jumping to 13.1 per cent, or $1.80, to $15.52, in midday trading yesterday was good news or bad.

The 5-per cent rise in the share prices, which rose 16 per cent on intraday trades was due to the news that state-run Korea Development Bank was open to investing in the credit-hit investment brokerage firm as it seeks much-needed capital and market confidence.

For the South Korean bank, Lehman's prevailing lowered valuations would enable it to buy it and extend its their reach overseas.

In fact, Lehman's stock had taken a beating on Thursday when talks between Lehman and potential foreign investors from Korea, Singapore and China broke down from a possible deal thinking it to be too risky.

Lehman could not find itself an overseas investor to bail it out even as Merrill Lynch attracted two multibillion-dollar investments Singapore's Temasek in the past year, Morgan Stanley received $5 billion from China Investment Corp and Abu Dhabi poured in over $7.5 billion in Citi.

The Korean bank is said to be looking at various options, one of which could be a possible acquisition of Lehman, which is only looking to hike-off its commercial mortgage-backed business and roughly $40 billion in commercial real estate investments.  It may also seek bidders for its investment management division, including the richly valued Neuberger Berman fund complex.

Lehman is likely to incur a net loss of more than $2 billion and write-downs of more than $3 billion in the current quarter, ecpected to rise further to $4billion in the next quarter and the mortgage-related assets will suffer a continuing decline. In the last 12 months, the Lehman stock has fallen 76 per cent.

Compared to Merrill Lynch which had to take a write-down $45 billion in assets and Citigroup about $40 billion Lehman, although smaller in size, has about $61 billion in mortgages and asset-backed securities.

Analysts blame Lehman's reluctance in taking speedy remedial measures for having compounded its problem,  compared to Citigroup which hiked off its large German consumer banking franchise, and Merrill Lynch sold for 22 cents its $31 billion portfolio of mortgage-related collateralised debt obligations as well as its stake in Bloomberg L.P.

In a desperate bid to reduce risk on its balance sheet, Lehman sold $22 billion in illiquid assets out of a total of $147 billion.

In data released by Standard & Poor more than 41 per cent of the subprime mortgages made in 2006 are delinquent. About 40 percent of the securities packaged sold by Lehman with subprime mortgages from 2006 are delinquent.

Analysts say if Lehman is unwilling to sell out at a deeply distressed value then the stage is set for a hostile bid to take over the whole company.

For a company whose market capitalisation has been beaten down to $9.5 billion and with a gloomy scenario ahead, Lehman is an open invitation for a hostile investor with deep pockets.

If the state-owned KDB does acquire Lehman it may use the collapse of the sub prime mortgage market that has caused more than $500 billion of losses and writedowns to gain customers and acquire cheap financial assets of the company.

In India investors in the participatory note (PN) account of Lehman Brother's moved their positions to other firms on the news of the impending takeover.

However, some market analysts feel that a hostile takeover is unlikely as Lehman employees own about 30 per cent of its shares and US regulators would, in all probability, not be particularly keen on a foreign takeover of a key financial institution.