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I'm not sure it was that bad: Bear Stearns was simultaneously preparing a bankruptcy filing in the event the deal had fallen through Better 2/share than zero.

I'm not sure it was that bad: Bear Stearns was simultaneously preparing a bankruptcy filing in the event the deal had fallen through Better 2/share than zero. What's strange...really strange...was just how wildly wrong the market was on Friday. 30/share on a company putting bankruptcy paperwork together. That's scary.

wallflower 19y ago
From DealBreaker.com's liveblog of tonight's 8PM JPMC conference call (http://tinyurl.com/2jlhjy http://tinyurl.com/2jlhjy) "8:24. Good question about how to reconcile the alleged $80 per share book value and todays $2 per share price. JP Morgan doesn't say it directly, but Bear's liabilities must be severe." "8:35. Bear Stearns does own it's building, which means JP Morgan is getting a huge piece of midtown real-estate as part of the deal. By our math (which is shaky even when we haven't been drinking all day), that means either the building or the business is worth something like negative $400 million."
- ctkrohn 19y ago
  The litigation risk is a huge component. There are going to be massive shareholder lawsuits (against both Bear and JPM) coming out of this. And who knows what kind of shady dealings at Bear might come to light during the acquisition? Dimon & Co. had only a weekend to put this deal together -- not nearly enough time to fully inspect Bear's books and to figure out all the risks of the trade. They had to set a price low enough to protect themselves.
  - whacked_new 19y ago
    Is all this stuff common knowledge amongst big firm traders, or Wall Street folks, or the financial sector at large? Are you just someone who follows the relevant -- and perhaps access non-layman -- information, or are you required to be sharp to know all this?
nickb 19y ago
So much for the efficient market hypothesis... http://en.wikipedia.org/wiki/Efficient_market_hypothesis http://en.wikipedia.org/wiki/Efficient_market_hypothesis
- tom_rath 19y ago
  It still holds, but it takes time for information to be priced in. Remember the insanity with pets.com, koop.com and the like not so long ago? We're seeing another "Emperor's New Clothes" situation today. The market will price things appropriately in time but, as the saying goes, the market can stay irrational far longer than you can stay solvent.
  - mynameishere 19y ago
    it takes time for information to be priced in That's basically why I called it "scary". It's amazing that there was 28 dollars/share worth of missing information in this situation. If that sort of oversight lapse is at all common, we're screwed worse than we can possibly imagine.
    - tom_rath 19y ago
      I wouldn't call it common, but huge companies make huge mistakes from time to time (recall Enron, Nortel, etc. just a few years ago) and the investors in those companies are the ones who pay the price. In this particular case the "missing information" is worse than you think: BSC shares were at ~$160 less than a year ago with much the same assets now being priced at only $2 per share. Remember though, the assets haven't disappeared: They still exist and are producing wealth in the economy. None of the included properties are going to evaporate. As with Enron's meltdown, business continues as usual under new ownership, with the old owners now holding significantly lighter wallets.
    - jdavid 19y ago
      My family had stock in Montana Power before the decided to become a Fiber company in 2001. the stock price was 70+ and 2 months later it was trading for cents.
jorgeortiz85 19y ago
The real question the market will be asking tomorrow morning is: are any other major banks on the brink of bankruptcy? Financials are going to have a wild ride on Monday.
- Spyckie 19y ago
  The Fed is covering us - they just cut interest rates by 25 points to 3.25% and they issued a new lending policy for banks. Not like its going to help in the long run... The Fed is just delaying the date when the whole financial system crashes... The sad thing is that unlike Japan's financial crisis in the 90's, who's going to bail the US out? China?
  - jdavid 19y ago
    or worse some bonehead warmonger. war and sinking economies have some strange correlation.
Dauntless 19y ago
They lied saying they didn't had any liquidity problems several times last week, until Friday when they said they are fucked. They should go to jail!
jdavid 19y ago
$2/share might be what it takes for JPMorgan to guarantee a profit. I wonder what the real market value is of Bear Stearns is, at $2 a share and a market value in 12 months of $10 a share sounds like a great investment for JPMorgan, and will result in a very strong company in about 1 year. This is definitely something to watch. I wonder what inside efforts were put together on this.

wallflower 19y ago

From DealBreaker.com's liveblog of tonight's 8PM JPMC conference call (http://tinyurl.com/2jlhjy http://tinyurl.com/2jlhjy) "8:24. Good question about how to reconcile the alleged $80 per share book value and todays $2 per share price. JP Morgan doesn't say it directly, but Bear's liabilities must be severe." "8:35. Bear Stearns does own it's building, which means JP Morgan is getting a huge piece of midtown real-estate as part of the deal. By our math (which is shaky even when we haven't been drinking all day), that means either the building or the business is worth something like negative $400 million."

ctkrohn 19y ago
The litigation risk is a huge component. There are going to be massive shareholder lawsuits (against both Bear and JPM) coming out of this. And who knows what kind of shady dealings at Bear might come to light during the acquisition? Dimon & Co. had only a weekend to put this deal together -- not nearly enough time to fully inspect Bear's books and to figure out all the risks of the trade. They had to set a price low enough to protect themselves.
- whacked_new 19y ago
  Is all this stuff common knowledge amongst big firm traders, or Wall Street folks, or the financial sector at large? Are you just someone who follows the relevant -- and perhaps access non-layman -- information, or are you required to be sharp to know all this?

nickb 19y ago

So much for the efficient market hypothesis... http://en.wikipedia.org/wiki/Efficient_market_hypothesis http://en.wikipedia.org/wiki/Efficient_market_hypothesis

tom_rath 19y ago
It still holds, but it takes time for information to be priced in. Remember the insanity with pets.com, koop.com and the like not so long ago? We're seeing another "Emperor's New Clothes" situation today. The market will price things appropriately in time but, as the saying goes, the market can stay irrational far longer than you can stay solvent.
- mynameishere 19y ago
  it takes time for information to be priced in That's basically why I called it "scary". It's amazing that there was 28 dollars/share worth of missing information in this situation. If that sort of oversight lapse is at all common, we're screwed worse than we can possibly imagine.
  - tom_rath 19y ago
    I wouldn't call it common, but huge companies make huge mistakes from time to time (recall Enron, Nortel, etc. just a few years ago) and the investors in those companies are the ones who pay the price. In this particular case the "missing information" is worse than you think: BSC shares were at ~$160 less than a year ago with much the same assets now being priced at only $2 per share. Remember though, the assets haven't disappeared: They still exist and are producing wealth in the economy. None of the included properties are going to evaporate. As with Enron's meltdown, business continues as usual under new ownership, with the old owners now holding significantly lighter wallets.
  - jdavid 19y ago
    My family had stock in Montana Power before the decided to become a Fiber company in 2001. the stock price was 70+ and 2 months later it was trading for cents.

jorgeortiz85 19y ago

The real question the market will be asking tomorrow morning is: are any other major banks on the brink of bankruptcy? Financials are going to have a wild ride on Monday.

Spyckie 19y ago
The Fed is covering us - they just cut interest rates by 25 points to 3.25% and they issued a new lending policy for banks. Not like its going to help in the long run... The Fed is just delaying the date when the whole financial system crashes... The sad thing is that unlike Japan's financial crisis in the 90's, who's going to bail the US out? China?
- jdavid 19y ago
  or worse some bonehead warmonger. war and sinking economies have some strange correlation.

Dauntless 19y ago

They lied saying they didn't had any liquidity problems several times last week, until Friday when they said they are fucked. They should go to jail!

jdavid 19y ago

$2/share might be what it takes for JPMorgan to guarantee a profit. I wonder what the real market value is of Bear Stearns is, at $2 a share and a market value in 12 months of $10 a share sounds like a great investment for JPMorgan, and will result in a very strong company in about 1 year. This is definitely something to watch. I wonder what inside efforts were put together on this.