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Surely you all wondered the same
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.
Posted by Tyler Cowen on March 17, 2008 at 07:26 AM in Economics | Permalink
Comments
"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.
Posted by: Jason at Mar 17, 2008 8:21:40 AM
The fact that an individual shareholder got on the call is hysterical. Those types of calls never let non-analysts get on the horn.
Btw, this is probably the most significant anouncement thus far in the financial services sector.
Posted by: Chicagoan at Mar 17, 2008 10:21:45 AM
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?
Posted by: Bill Drissel at Mar 18, 2008 9:17:20 AM
