NEW YORK -- Lehman Brothers Holdings Inc sold $4 billion of convertible preferred securities on Tuesday in an effort to dispel questions about the fourth-largest U.S. investment bank's stability.

Lehman's shares surged 10.7 percent in pre-market trading to $41.65 as the offering was seen as a vote of investor confidence in the firm. The sale met with strong demand even after rumors of looming write-downs at Lehman have cratered the company's stock for weeks.

Lehman has said in the past that it suspects that short sellers, who profit when share prices fall, are spreading rumors about the company to push its stock down.

Questions about potential write-downs at Bear Stearns Cos Inc were enough to trigger a run on the bank there, forcing what was once the fifth-largest U.S. investment bank to sell itself for a fraction of its former value.

Lehman said the convertible preferred securities were priced with a dividend yield of 7.25 percent and their principal can be used to buy common shares at $49.87, or a 32.49 percent premium to their closing price on Monday.

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