Saturday, March 22, 2008

Reuters article asks some GOOD questions on Bear Stearns

Good old Reuters asks a few questions about the Bear Stearns insanity:

By Martha Graybow

NEW YORK (Reuters) - Stunned Bear Stearns shareholders who saw investments virtually wiped out overnight when a takeover deal with JPMorgan Chase was unveiled are demanding to know how it was put together in the first place.

For instance, they -- and Washington lawmakers -- want answers on how the deal was arranged, and gained government approval and financing, all in a few hours, and seemingly without alternative bidders being canvassed.

"Stunned Bear Stearns shareholders who saw investments virtually wiped out overnight when a takeover deal with JPMorgan Chase was unveiled".
This bears repeating - these people saw their money go poof in a few hours, with no ability to react by that time.

"For instance, they -- and Washington lawmakers -- want answers on how the deal was arranged, and gained government approval and financing, all in a few hours, and seemingly without alternative bidders being canvassed." Yes, how does that happen in a FREE MARKET?

Billions of dollars in shareholder value has been wiped away in the last week. Based on current market prices, the takeover is valued at $2.41 a share, a shockingly low offer compared with Bear's $159 stock price last April.

"(...)the takeover is valued at $2.41 a share, a shockingly low offer compared with Bear's $159 stock price last April"

So - how does this deal work in practice?
If shareholders were to reject the JPMorgan offer, JPMorgan still would have been in a position to understand everything about Bear's trading strategies, staff quality and assets.

JPMorgan even has an option to buy the Bear Stearns' building if the deal collapses.

Excuse me?

Some questions the article poses:
Were other parties asked to bid on Bear Stearns, or did the government solely approach JPMorgan about the takeover? Were any overseas banks or private equity firms asked to consider a bid, or did the buyer have to be a large U.S. bank?

This is sorta funny - it reminds me of the NO-BIDS contracts in Iraq. Or Chicago. Or Boston. It is funny how things REALLY work here in this great American Free Market system.

how did the Federal Reserve arrive at the $30 billion figure and did it discuss with Bear whether it was preferable to arrive at a quick sale or explore a bankruptcy filing? How could due diligence be done and the deal approved in the space of a few frantic hours on Sunday?

The 2nd question here is rhetorical - of course there was no due dilligence, just a cabal of men breaking every law on the books in America, making decisions without any investor input whatsoever, and without exploring any alternatives.

The 1st question is easy - if Bear Stearns declared bankruptcy, it would mean that the Bear Stearns executives - the CEO, CFO etc etc. would not be PAID BONUSES. See, simple!

Think about this for a moment.
This deal, this Bear Stearns and J.P. Morgan merger is HUGE.

If, say, Google and Microsoft decided one day to merge, and then a few hours later, with the help of the FED, they would - people would be shocked. Even the media pundits.

But with this merger - nothing to see here, please move along, move along...

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1 comment:

Greg Bacon said...

NEW YORK (Reuters) - The Securities and Exchange Commission is investigating the events leading up to the collapse of Bear Stearns , specifically a surge in options contracts betting that the investment bank's share price would fall sharply, according to the Wall Street Journal.

Citing people familiar with the matter, the paper reported the SEC probe focuses on a surge last week in "put" options that came days before the firm's proposed sale to J.P. Morgan Chase & Co. for stock now valued at about $278.5 million, or $2.32 a share.

A put option allows the buyer of the option the right to sell a certain number of shares in the company at a specific price within a set time. (Reporting by Edward Tobin; Editing by Derek Caney)

Source: ABC News

No, say it ain't so! Someone using insider info to profit on this tragedy?

That don't happen here in America, does it?

Uhh, wait a minute, that reminds me of those put options someone bet against American Airlines the week before 9/11.

But this is America, the land of the free and the ... oh fuck it.