Monday, March 17, 2008

JPMorgan to buy Bear

We all knew this was coming. JPMorgan is going to buy Bear Stearns. The real shock is the price - JPMorgan is paying just $2 a share for Bear, or a total of $236 million.

That per-share payout is just one-fifteenth of Bear's stock price on Friday and miles off its record share price of $172.61 last year. According to the Reuters, that means Bear's shareholders, including British billionaire Joseph Lewis and Bear Stearns' Chairman Jimmy Cayne, will have their holdings wiped out by the deal.

Reuters quotes Emanuel Weintraub, managing director of Integre Advisors, a New York-based money management firm, with an important observation - "It's scary for what it says about the value of financial assets, if a company is worth only a small percentage of book value."

According to the Wall Street Journal, the hardest hit are going to be Bear's employees, who hold as much as 30% of their pensions in Bear stock, according to press reports.
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