June 11 (Bloomberg) -- Lehman Brothers Holdings Inc. fell the most since the takeover of Bear Stearns Cos. as Merrill Lynch & Co. analyst Guy Moszkowski cut his rating on the firm to ``neutral'' a week after telling clients to buy the stock.

Lehman, which lost 64 percent of its market value this year, fell $3.75, or 14 percent, to $23.75 at 4:15 p.m. in New York Stock Exchange composite trading. Options traders increased bets that shares of the fourth-largest U.S. securities firm will fall to $15 by next month.

The ``scale of the second-quarter loss and capital-raise indicate lower return on equity potential and lower confidence, especially given Lehman's remaining exposure,'' Moszkowski wrote in a note today. He reduced his price target to $28 a share from $36.

Lehman Chief Executive Officer Richard Fuld raised $6 billion on June 9 to help survive the collapse of the mortgage market. The bank said it will post a $2.8 billion second-quarter loss, marking the first time the firm will fail to deliver a profit since going public in 1994. The loss figure exceeded the most pessimistic estimate in a survey of analysts by Bloomberg.

Goldman Sachs Group Inc., the biggest U.S. securities firm, declined 2.9 percent to $162.40 at 4:15 p.m. in New York Stock Exchange composite trading. Morgan Stanley, the No. 2 firm, dropped 5.4 percent to $37.13, while Merrill Lynch fell 6.6 percent to $35.46. All the firms are based in New York.

Ratings Lowered

Other analysts lowered ratings on Lehman yesterday because of the second-quarter loss. Wachovia Corp. shifted to ``market perform'' from ``outperform'' and Credit Suisse Group switched to ``neutral'' from ``outperform.'' Oppenheimer & Co.'s Meredith Whitney reduced her estimate for the year to a loss of $3.34 per share from a gain of $1.58.

``You have nervousness surrounding the brokerage earnings that are coming out next week from Goldman and Morgan Stanley,'' said Steve Sosnick, equity risk manager at Timber Hill LLC, the market-making unit of Interactive Brokers Group Inc. in Greenwich, Connecticut. ``The financial problems are not going away.''

Options traders increased bets Lehman shares will keep sliding and plunge as low as $15 by next month. Trading of contracts to sell the stock rose to 311,779 contracts, or more than double the 20-day average. Those bearish bets, or puts, outnumbered bullish ones, or calls, by about 2-to-1.

The most-active contracts, which give the right to sell the stock at $15 before July 18, advanced 157 percent to $1.08 and accounted for about one-seventh of all put trading.

`Fire Insurance'

``People are taking a shot that it could go down to $15,'' said Stefen Choy, founder of Maxima Financial, a market maker on the NYSE Arca exchange in San Francisco. ``Everyone smells the smoke so they're buying fire insurance. People got so scared about what happened to Bear Stearns that they just grab those now.''

June $25 puts, the second-most active, almost tripled to $2.84. Puts give the right to sell a security for a certain amount, the strike price, before a given date. Calls convey the right to buy. This month's options expire June 20.

``These put buyers aren't necessarily speculating that it's going to those levels just that it's possible and that they want to be protected,'' said Chris Jacobson, a senior options strategist at Susquehanna Financial Group in Bala Cynwyd, Pennsylvania. ``Investors continue to fear that there's significant downside risk in the financials.''

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net;

Last Updated: June 11, 2008 17:15 EDT