Not all investors are expected to be pleased with the deal. A
conference call with investors and analysts on Sunday night was broken
up when a Bear Stearns shareholder sought an explanation of why he
would be better off approving this transaction rather than seeing Bear
Stearns file for a Chapter 11 bankruptcy.The JPMorgan executives
demurred, instead referring the investor to Bear Stearns executives for
an explanation. The shareholder declared that he would vote against the
deal.Afterward, Mr. Cavanaugh said JPMorgan felt comfortable in
pulling the trigger despite the short due-diligence process. “We’ve
known Bear Stearns for a long time,” Mr. Cavanaugh said.
Vis-a-vis that last sentence, last year the stock price was $170, late Friday it was $30 a share, yesterday the deal was done at about $2. Here is the story. From published accounts, the nature and extent of the Fed and Treasury obligations is not yet clear.
“Shareholder,
The company you own stock in has 30X more debt than assets. No one wants to loan the company money or purchase its debt for less than a steep discount. Shareholders are last in line to be paid in a bankruptcy. Also, 2 is > 0.”
I’m sure saying any of the above would have freaked people out. Better to let the share price on Monday tell the shareholder.
2007: BS posts first quarterly loss in 85 years.
2008: BS goes toes-up.
Something is wrong with this picture. Either the accounting system hides serious flaws and hazards or someone imprudent was willing to bet everything on the flip of a coin. What kind of return did these punters expect? What kind of reckless gambling brings financial wizards to selling for a penny or two on the dollar?
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