Bear Stearns Tidbits

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Mar 17, 2008 7:15 pm

Not sure how many have heard these tidbits surrounding Bear Stearns:

 
When the (buy us) presentation was held by Bear Stearns for interested parties, only 2 companies showed up, JP Morgan & Joseph (Flowers or Lewis?) Inc. It was thought that the other (no show) firms' balance sheets may not have allowed them to place an offer. 
 
Although terms of the deal are still vague, JP Morgan essentially has a Fed guarantee on the assets of Bear Stearns; i.e., a no-lose proposition.
 
Joseph Lewis, a billionaire, invested over $1.10 billion in Bear, since January of last year, acquiring a 9% stake. Now, well, uhhh, let's just say he has a heap of tax-loss write offs. A big heap.
Mar 17, 2008 8:36 pm

Can someone explain to me, with a $2 buyout offer on the table, and no other capable buyers showing up with offers, the stock closed at $4 and change today?

What am I missing?
Mar 17, 2008 8:49 pm
pratoman:

Can someone explain to me, with a $2 buyout offer on the table, and no other capable buyers showing up with offers, the stock closed at $4 and change today?

What am I missing?


Shorts covering....

Mar 17, 2008 9:12 pm

Sale still has to be approved by the shareholders as BSC is still a publicly traded company.  The share price reflects optimism that someone (anyone) will step up with a better offer than the ridiculous $2 a share offer.

Mar 17, 2008 9:14 pm

Doesnt make sense to me. Who is going to step in. Citi has their own problems, BAC is trying to swallow Countrywide. Who is going to step in, JC Flowers? Who in the F**ckn hell is JC Flowers? Sounds like one of Jordan Belfourts firms, of Stratton Oakmont fame.


 
As far as shorts covering, why would someone short, cover at $4.50, if the stock is being taken under at 2
Mar 17, 2008 9:18 pm

Anybody with more than $230mm could step in.  The building in NY is worth more than $230mm.  It would not necessarily be another big financial, it could be a smaller player with a lot of cash.  With the government gaurantee (which I would bet would be offered to other prospective buyers) all it takes is the cash.  As bad as it is in the financial sector, $230mm still is not much money.

Mar 17, 2008 9:21 pm

Who would step in?  How about Wachovia, Wells, Berkshire, Goldman, or someone like Icahn.  Possiblilities are endless.

Mar 17, 2008 9:37 pm

OK, good points all.

If bidders emerged, and the stock got bid up to say, 7-8$, or a billion, it would be good for the market.
But I guess, if my grandmother had balls she'd be my grandfather, so I am dreaming.
Mar 17, 2008 10:51 pm

Don't forget there was a building & the liability - debt payments, depositors, current deals, payroll, etc. It couldn't be someone w/ $231MM in cash because the run would have just continued. It had be someone w/ 100's of billions of dollars behind it & a good name to restore confidence. Jaime Dimon somehow managed to avoid the subprime mess to a great degree & now he's King.



It makes a ton of sense that the Fed required a bank to be the acquirer. They're taking $30B of the most toxic of stuff off of JP Morgan's books for the time being. They don't want to have to deal with the same issue twice.



Brilliant move by the Fed, and a double tot to Mr. Dimon & JPM.

Mar 18, 2008 5:38 am
Ferris Bueller:

There were a bunch of bidders, the post above is incorrect. Many of them were willing to pay much more for Bear, BUT the fed would only allow a bank to buy them. Hence the JPM deal at $2.

 
The tidbits were compiled from several articles I read. However, given the obscene low price paid, I would choose to believe that few bidders showed-up. I can't confirm Fed restrictions on just "who" could show-up for the "dog & pony" show.
Mar 18, 2008 7:40 am

The fed held a gun to Bear's head and said do a deal today or we're gone. $2.00 on Sunday or bankruptcy on Monday. The $4.00 stock price reflects exactly what has been posted here, that is the belief that other buyers will emerge.

 
What we're not seeing here is what we don't know. And that is; just how bad was this that the fed did what they did and bear did what it did? Safe to say, it was really bad?
Mar 18, 2008 8:09 am

Sorry, BondGuy... bad situation for the shareholders.

Mar 18, 2008 10:22 am
Ashland:

Sorry, BondGuy... bad situation for the shareholders.

 
I was being retorical, whatever that is. of course really bad for all.
 
When discussing BSC assets everyone keeps pointing out Bear's  building and what it's worth. I would venture that Bear's Pass Line bets have eclipsed the value of the building. Regardless, what everyone is overlooking is that building's most valuable feature. And that is it's rooftop access and distance to the pavement.
Mar 18, 2008 3:17 pm

Good one, BG.

Mar 18, 2008 3:48 pm

There is a good "background" article in today's Wall Street Journal.

 

I predict that, within 6 months, there will be another Sarbanes-Oxley-type of legislation passed to "remedy" this type of situation.
 
 
Mar 18, 2008 9:46 pm

Dobe, you are probably dead on. Too bad the people that come up with these "remedies', wouldnt know a remedy if it farted on them.

Mar 18, 2008 9:49 pm

Had a dinner seminar tonight with a Fixed Income Strategist as the guest speaker. Although he is Fixed Income, he has a lot of contact with the trading floor and other strategists. Very bright guy.

I spoke with him afterwards about the fact that Bear traded in the $6'S today. His take is that there is no way this deal gets done at $2.00. The company is worth more than that, and the shareholders wont let it happen. Jamie will have to pay up. Not anything close to $30, but not $2.00 either.
I agree with him. There is no way this stock goes from $2 to 6 plus, on short covering.