Lehman has suffered heavy losses from the credit crunch
Shares in US investment bank Lehman Brothers have plunged 45% on fears over its finances, sending the main Wall Street stock indexes down sharply.
Amid fears that Lehman is struggling to raise $6bn (£3.4bn) to cover sustained credit crunch-related losses, its shares ended down $6.36 to $7.79.
The fall sparked a wider sell-off on Wall Street, with the main Dow Jones index falling 280 points to 11,231.
This removed almost all of the gains it had enjoyed on Monday.
The Dow ended Monday up 290 points after the US government's bail-out of mortgage giants Freddie Mac and Fannie Mae pleased investors.
Meanwhile, the Nasdaq index closed down 60 points on Tuesday after having risen 14 points on Monday.
The main concern regarding Lehman is that a potential investment from Korea Development Bank has fallen through, something it has yet to comment on.
Lehman, the fourth-largest US investment bank, had hoped to secure a deal with the Korean fund before announcing third-quarter earnings on 18 September.
There is now speculation that this trading announcement may be brought forward.
Analyst Marc Pado of Cantor Fitzgerald said Lehman needed "to come out and reassure Wall Street that they are an ongoing entity".
"Otherwise there's no mercy on Wall Street once they lose confidence in you."
Lehman and KDB are thought to have been in talks for two months about the prospect of the state-run Korean bank taking a stake in Lehman.
Lehman has been linked with a number of overseas financial firms as it tries to shore up its finances.
Recent reports have suggested that Japanese brokers Nomura Holdings are considering buying a stake in Lehman.
Other financial firms from China, Qatar and Abu Dhabi have also been linked to Lehman.
The bank is also said to be meeting with potential buyers of its Neuberger Berman asset management unit to raise funds.