Once the fourth largest Wall Street investment bank, Lehman Brothers (NYSE:LEH) has seen its market capitalization shrink from over $47 billion at its stock’s 52-week high of $67.73 down to just $5.4 billion at today’s new 52-week trading low of $7.64 per share.By the New York close, Lehman shares had recovered slightly to trade at $7.79, down nearly 45% for the day on reports that negotiations for a capital infusion from state-controlled Korea Development Bank (KDB) had ended without plans for investment.

Korea’s Financial Services Commission refused to confirm that talks with Lehman had ended, but the report was enough to send Lehman shares into a tailspin.

The stock’s slide was enough to cause Standard & Poor’s to revaluate Lehman’s counterparty credit risk.

“The CreditWatch listing stems from heightened uncertainty about Lehman’s ability to raise additional capital, based on the precipitous decline in its share price in recent days,” S&P analyst Scott Sprinzen wrote, Bloomberg News reported. S&P said there is a chance of “lowering the ratings by more than one notch.”

If S&P were to lower Lehman’s credit ratings significantly, the investment bank’s ability to do business, and its very existence, would be in jeopardy. It’s hard not to draw comparisons with the Bear Stearns collapse, which ultimately ended with JPMorgan Chase & Co.’s (NYSE:JPM) purchase of what was at that time the fifth largest Wall St. investment bank for just $10 per share.

A hypothetical offer of $10 per share for Lehman would represent a 28% premium over yesterday’s closing price.

Richard Bove, an analyst with Ladenburg Thalmann, has been critical of Chief Executive Richard Fuld’s management of the beleagured investment bank for quite some time. Two weeks ago Bove suggested Lehman could find itself the victim of a hostile takeover if Fuld was not able to negotiate an emergency liquidity boost.

“Buyers seem to believe that Lehman is overvaluing its assets and refuse to hit the bid,” Bove wrote in a research note, BusinessWeek reported. “The net result is no action.”

As the list of potential saviors continues to dwindle, so does investor confidence in Lehman Brothers.

After taking $8.2 billion in subprime credit-related losses and writedowns in the past 12 months, Lehman stock is down over 88% year-to-date and is 88.5% off its 52-week peak.

Hungry for substantive news of how Fuld plans to shore up Lehman’s $60 billion mortgage-related portfolio, all investors have been offered so far is some management changes. But the clock is ticking and Fuld will have to face the music soon and come clean with his plans for the future of Lehman Brothers.

Source: Lehman Ripe for Takeover as Market Cap Plunges Below $6 Billion