2008-03-16 18:31:35
JP Morgan Buys Bear Stearns for $2 Per Share
|
Yes, you read that right.
Bear Stearns, one of the biggest and respected investment banks in the world, has agreed to be purchased by JP Morgan Chase for $2 per share, which works out to around $236.2 million dollars.
Bear Stearns, a company that closed at $30.00 on Friday afternoon and had a market cap of over $4 billion dollars, has seen almost four billion dollars worth of market cap shaved off of its value over the course of just two days.
Bear Stearns, a company that just last Monday was trading at around $70 per share.
Bear Stearns, a company that was trading at $150 per share one year ago today, is now being sold for a mere fraction of that amount.
This is a once in a generation financial crisis that we are going through right now. The US government was actively involved in the talks for JP Morgan to purchase Bear Stearns, and they will be providing special financing (funding up to $30 billion dollars of Bear Stearn's less liquid assets) in order to this transaction to work. The Fed has also cut the discount rate in coordination with this move, which shows you just how important it was that Bear Stearns didn't collapse.
What would have happened if Bear Stearns had collapsed? It would have set off a chain reaction that likely would have led to the demise of more high profile banks and hedge funds. The damage to the global financial markets would have been catastrophic.
Even so, the global financial markets are in a bad, bad shape. Are other investment banks about to go under? Will the Fed step in and provide the same type of funding that it did in the case of Bear Stearns?
Is this the "floor" for financial stocks, or is this the beginning of something much more sinister?
How much money was lost in Bear Stearns? How much collateral damage will it cause? Who will be bailed out next? How much further will the US dollar fall? Will the financial markets reeling and the price of oil/gold skyrocketing, can anything save us from a crippling recession or even worse?
|
