Why A "Run" On Jeffries (JEF) Isn't Exactly Possible And It's Not The Next Lehman

I’ve seen the posts popping up from the engagement-baiting talking heads. Jefferies is next, they say. Another bank about to crack, the next Lehman, the next Bear.

Visions of Margin Call dance in people’s heads: seedy late-night boardrooms, the usual finance villains pulling levers, ready to nuke the financial system.

But let’s stop right there. This isn’t that and not even close.

So if you’re thinking about shorting the stock, wondering how a broker-dealer holds together when the market whispers collapse, or just want to know if Jefferies is worth buying, read on.

No clickbait. Just real institutional-level analysis, a lesson in reflexivity, and a clear-eyed outlook on what the market’s getting wrong.

First Brands is the headline, but it’s not the heart of the story. The real risk lives in the shadows, the ambiguity, the uncertainty, the unanswered questions. Because the direct hit from Point Bonita’s $715 million in receivables might be containable. But layer on disappearing collateral, opaque off-balance-sheet financing, DIP dilution, and DOJ investigations, and what you get is a textbook reflexive setup. The longer the headlines outpace the facts, the more Jefferies risks trading like a confidence story instead of a fundamentals one. And in markets like this, the stocks that fall hardest aren’t always the ones with the biggest losses, they’re the ones investors stop trusting.

You Can’t Have a Bank Run on an Investment Bank

But let’s make one thing clear …

Jeffries is an investment bank, not a commercial bank. A commercial banks’ liability side is composed of some debt, some capital, and a lot of retail deposits. Retail deposits are obligations of the bank, to customers that have no gates, no minimum maturity (they’re literally called non-maturity), and broadly speaking can leave whenever they want. Retail deposits are what cause the runs made famous in It’s a Wonderful Life and real world examples like Silicon Valley Bank and First Republic Bank.

With an investment bank however they do not take retail deposits and their liablity side of the balance sheet is completely different.

Jefferies has $1.2 billion in short-term borrowings which are contractual loans with original maturities under one year, commercial paper, warehouse lines, and bank facilities. They cannot be pulled early unless Jefferies defaults.

Then come the secured financing buckets. Repos total $12.1 billion, securities loaned account for $2.5 billion, and other secured financings add another $2.7 billion. All three are collateralized, term-based, and margined daily. Even in stress, counterparties renegotiate terms or raise haircuts, they do not yank cash on demand. These are institutional structures, not retail IOUs that can move with the push of a button on a mobile phone.

Jefferies also reports $12.4 billion in financial instruments sold but not yet purchased. These are short positions, trading exposures marked to market every day. There is no funding withdrawal here, just a trading book in motion.

Another $3.7 billion is payable to brokers, dealers, and clearing organizations. These are clearinghouse obligations, margin requirements, and unsettled trades. They are operational, netted daily, and governed by strict rules. They do not and cannot flee.

Customer payables total $4.45 billion. This is the closest thing to cash that could move, but even here it is locked down. These are brokerage balances, free credit and short-sale proceeds, segregated under SEC Rule 15c3-3. The firm cannot use these funds. Withdrawals come from a special reserve account, not operating capital. You cannot run what is already walled off.

Accrued expenses and other liabilities add up to $3.16 billion. That includes payroll, interest, and taxes due.

Outside of all this sits $16.0 billion in long-term debt which is structured, fixed, laddered, and entirely out of reach from any short-term panic. That is the liability stack. Nothing in it runs and everything turns over by contract.

The Comparisons to Lehman & Bear Stearns Fall Flat

But the stock has been absolutely hammered, no?

Yes, and while we’re at it let’s get something else out of the way. This isn’t Bear Stearns. This isn’t Lehman. And not just because Jefferies is perfect, it’s not. But because the structure is different, the plumbing is different, and fire exits are marked this time.

As of Q3 2025, Jefferies runs with total assets of $73.8 billion and total equity of $10.8 billion. That’s a gross leverage ratio of 6.8x. Strip out non-controlling interest and you’re at 8.0x common equity leverage. Compare that to Lehman’s 30–33x before its collapse, or Bear Stearns at 32–36x. Those firms were the original altcoins, levered 30 to 50 times, where a 2–3% asset markdown triggered full liquidation.

Keep in mind also it’s what they were levering. Bear and Lehman were stuffing their books with long-dated, illiquid mortgage bonds, off-balance-sheet CDO warehouses, and Level 3 assets that couldn’t be priced in a panic. And they were funding it with overnight repo, unsecured short-term borrowings, and prime brokerage cash that fled the second things turned. Jefferies, on the other hand, runs a trading book mostly marked to market, backed by daily margined secured financing, and governed by regulatory liquidity buffers that didn’t even exist in 2008.

Lehman didn’t fail because the losses were unthinkable, it failed because the funding model collapsed in 72 hours. Jefferies likely will take an earnings hit from Point Bonita. It might even get dragged into headlines longer than it should. But the core difference is this: Jefferies can mark its book, it can roll its repo, and it doesn’t die when the market blinks.

Earnings Likely Will Be Hit, But They’re Not Extinction Level Events

Even if Jefferies absorbs the full hit from Point Bonita’s First Brands exposure, this is not a capital problem, it’s an earnings and confidence problem. Jefferies reported trailing twelve-month net income of approximately $875 million. In the base case, where its $113 million direct equity stake in Point Bonita is written down to zero, net income would fall to around $762 million. That’s a 13% earnings haircut, not immaterial, but not system-breaking. A moderate case, where Jefferies absorbs additional losses tied to redemptions (such as Morgan Stanley’s expected ~$40 million) and legal or reputational fallout, could raise total losses to $200 million, pushing net income down to $675 million, a roughly 23% drawdown. In a more severe scenario, where $300 million in losses flow through, via fund restructuring, redemption mismatches, and legal overhang, Jefferies’ net income could drop to $575 million, more than a 34% reduction. That scale of decline would sting. It wouldn’t trigger regulatory capital stress or funding issues, but it would compress the earnings multiple, and create reflexive reputational drag.

I’ve seen this movie before too many times: the confusion, the narrative break, the panic selling.

But to put things in context, Goldman Sachs estimates total losses at only $45 million pre‑tax, or roughly 5 % of projected 2025 earnings, which is far smaller than even the mildest scenario here, and makes these ranges intentionally conservative and shows the real risk is perception, not solvency for now.

On a capital basis, the damage is contained. Jefferies’ common equity stands at $9.2 billion, with tangible common equity (TCE) estimated around $8.8 billion. A $113 million impairment hits common equity by just 1.2%. A $200 million loss takes that to 2.2%, and a full $300 million drawdown trims capital by 3.4%. There’s no solvency concern, no rating risk, and no funding pinch. Liquidity remains robust. What’s at stake is not the balance sheet, it’s the perception of control. The danger isn’t capital impairment, the danger is that Jefferies gets treated like a credit story when it’s actually an earnings hiccup.

Uncertainty & Confidence Drive Pricing, Not Fundamentals

The uncertainty isn’t just about Point Bonita. It’s about what else might be lurking, because once opacity enters the room, the market fills in the blanks with worst-case scenarios. There’s no public line-item detail on the rest of Leucadia’s fund book, no transparency into how the $48 million in First Brands loans inside Apex CLOs are tranched or hedged. And without that, markets don’t wait for answers. They assume contagion. This isn’t about accounting anymore. It’s about reflex. And right now, trust is what’s repricing, not just exposure.

The $715 million headline from First Brands is real. The redemptions from LPs are real. The DOJ probe is real. But the deeper threat isn’t in fee loss or legal cost. It’s in the reflexive loop that eats confidence. Broker-dealers don’t die from math. They die from doubt, from counterparty’s wondering if you’re good, if your assets are legit. And if you don’t control the story, that story starts to control you.

Jefferies doesn’t fund itself with runnable deposits, but its equity trades as if it does. When reputational mixes with structural opacity, multiples compress, cost of capital rises, and even a one-off issue becomes a systemic story in the eyes of the tape. The reflex becomes the reality, that’s what Handler has to solve, not just the NAV marks, the narrative. When confidence evaporates, just ask Credit Suisse, SVB, or First Republic, the unwind happens faster than the balance sheet can respond. And when the market thinks you’re the next one, it prices you like you already are.

Today, at ~12.5x forward and 17x trailing, Jefferies isn’t priced like a complete blow-up. But it’s not priced like a fire sale either, especially next to the other investment banks below. There’s still a wave of FUD to play out, and the reflex may overshoot the facts before clarity returns.

Markets don’t move on spreadsheets, they move on narratives. Jefferies doesn’t have a funding crisis, it has a confidence bruise. Some of the best opportunities of my career have come when the FUD is high, but the balance sheet is actually sound. And this is one of the reasons why I like the doomers. Because when people start believing the headlines of “Is Jefferies the Next Bear” or “Is a Run On Jefferies Coming” and reflexively dump otherwise strong, fundamentally sound companies, that’s when the real opportunities come.