JPMorgan to buy Bear for $2 a share

Question

Guess what's going to happen to global and US stock markets tomorrow... https://news.yahoo.com/s/ap/jpmorgan_bear_stearns

bsd_lover · Answer

Its already started in Australia 2.5% down at lunchtime.

aaudetat · Answer

ah, companies getting federal bail-outs, not taking responsibility for their own actions, clearly being enabled through corporate welfare....

djhouse81 · Answer

What's going to happen to those who just got post-grad and intern positions at Bear?

bsd_lover · Answer

What's going to happen for us '10 grads who will have one less employer

kk.iyer · Answer

We'll be lucky if it stays as just "one" less employer...especially for internationals...

SkiC · Answer

Unfortunately, the bleeding won't stop at one. My bet is that Lehman is next...

pelihu · Answer

This isn't really a federal bail-out. They are selling for about 3% of what the stock was trading at 2 days ago. This is essentially a liquidation, with JP Morgan assuming the liabilities of Bear. JP has a lot at stake because they did a lot of business with Bear, but this deal does provide some sense of stability to the market as a whole.

I'll be very interested to speak with people who accepted offers from Bear. If they get to work at the new combined company, that's very fortunate for them. JP Morgan was a very popular choice this past fall and a top choice for many seeking banking internships, while Bear was already showing signs of trouble and top candidates were shying away (not to mention Bear's reputation wasn't as strong in general). My guess is that they will honor many of the internship offers, and Bear may run their own internship for the summer separately from JP because they companies just won't be that integrated yet, but that it will be very difficult for Bear summers to secure full time offers. JP has little interest in Bear's investment banking arm (they want the prime brokerage and the private bank) and I'd definitely bet on huge cuts in those divisions.

As to whether Lehman will be next, they are in a substantially different position that Bear. The WSJ journal published an article yesterday describing Lehman's (and Goldman, Morgan and Merrill's ) cash and collateral positions, and they are well positioned to meet their obligations (reserves covering at least 18 months of debt payments). Lehman also issued a new $2B 3 year debt offering that was substantially oversubscribed. Given the current environment, the financing is considered long term (heck 28 days is considered long term right now) and it shores up Lehman's balance sheet. Also, Lehman, along with Goldman had the smallest subprime related write downs at $1.5B. Lehman stock was negatively affected by the Bear news on Friday, otherwise I think they would have been in the mix to buy Bear (they've been a rumored buyer for some time).

All of the investment banks have some level of risk, given the current credit markets, but things would have to deteriorate much much more for Lehman to be in the same type of trouble as Bear. Bear's market cap was in the neighborhood of $6B 2 days ago, then dropped to $3.5B on Friday. They are being sold for $230M. Lehman's market cap is about $21B even after the drop on Friday. I think they really are 'too big to fail' (a phrase with a lot of history in the banking world) and that the Federal government will be stepping in all over the place before Lehman is in danger of liquidating.

kidderek · Answer

Actually, Lehman is Goldman-lite. I'd keep my eyes on Merrill, for now.

pelihu · Answer

Would definitely agree with that. As we interacted with firms this past fall, Bear and Merrill seemed to be having the most difficulty while JP and Lehman seemed to be the strongest (and most popular). Goldman was a total outlier compared with other banks. Things have changed since then, and mono-line investment banks have been hurt by the credit crisis a lot more than banks with diversified businesses, but there are a lot of other organizations out there (banks and other related businesses) in much worse shape than Lehman.

But, things are changing quickly.

But, things are changing quickly.

djhouse81 · Answer

They are very very lucky if they get to work at JP. Jamie Dimon is known to be a hard-nosed slicer and dicer. One of the reasons why JP has acquired companies so efficiently and a reason why they are hanging tough in this crunch.

dosa_don · Answer

The market is actually up now

89nk · Answer

I also read that JP was going to lay some people off before the whole buyout of Bear Stearns. So how does this affect future B school grads? Or which sections are they reducing? And is this only the beginning or is it bottoming out?

pelihu · Answer

The word is that JP Morgan will lay off a huge chunk of Bear Stearns employees. Not a surprise really, all things considered; JP is only interested in a tiny part of Bear (and the value of the real estate).

I take heart in the fact that financial stocks bounced back from midday lows; I think (and hope) this means that the smart money on the street believes that financials are on solid footing and were oversold. Tomorrow is a big day because Goldman, Morgan and Lehman will all be releasing their quarterly numbers. Given current accounting rules, any hidden bad news should come out then. If more bad news comes out, it's anyone's guess what will happen; if everything is solid, I think the beaten down stocks could bounce back sharply.

kwam · Answer

"Is this the real price?

Is this just fantasy?

Financial landslide

No escape from reality

Open your eyes

And look at your buys and see.

I'm now a poor boy

High-yielding casualty

Because I bought it high, watched it blow, Rating high, value low Any way the Fed goes Doesn't really matter to me, to me

Mama - just killed my fund

Quoted CDO's instead

Pulled the trigger, now it's dead

Mama - I had just begun

These CDO's have blown it all away

Mama - oooh

I still wanna buy

I sometimes wish I'd never left Goldman at all.

I see a little silhouette of a Fed

Bernanke! Bernanke! Can you save the whole market?

Monolines and munis - very very frightening me!

Super senior, super senior

Super senior CDO - magnifico

I'm long of subprime, nobody loves me

He's long of subprime CDO fantasy

Spare the margin call you monstrous PB!

Easy come easy go, will you let me go?

Peloton! No - we will not let you go - let him go Peloton! We will not let you go - let him go Peloton! We will not let you go - let me go Will not let you go

- let me go (never) Never let you go - let me go Never let me go - ooo

No, no, no, no, no, no, no, -

Oh mama mia, mama mia, mama mia let me go S&P had the devil put aside for me For me, for me, for me

So you think you can fund me and spit in my eye?

And then margin call me and leave me to die Oh PB - can't do this to me PB Just gotta get out - just gotta get right outta here

Ooh yeah, ooh yeah

No price really matters

No liquidity

Nothing really matters - no price really matters to me

Any way the Fed goes....."

kwam · Answer

I know that this is mean, but the jokes on the market included this one:

Crude Reality:
"LA Galaxy paid more to Mr. Beckham than JP Morgan paid to Bear Stearns..."

svrider · Answer

kwam - this is so awesome. Did you adapt it? Someone needs to record it

kwam · Answer

Although Queen is one of my favorite bands, no I didn't, that's the way I received. Almost every week I receive many of this jokes... It's something to keep spirits up in this kind of envorinment :wink:

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JPMorgan to buy Bear for $2 a share

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