I still don’t believe this is happening. Last year i was offered a position with their MBS bond repo desk which i turned down. Later regreted it but am now sooo thankful. I can only imagine the morale now. Poor folks. The Morgan folks must be gloating…esp for getting in at $2/share
…they may find that even $2 was too much depending on how bad the books are. who knows, stearns probably has a bunch of garbage assets on their books and $2/share turns out to be a premium on the net book value…haha let’s wait and see who gets the last laugh. ps. even tho its kinda sad to see the stock go from $160 -> $2, you gotta feel worse for that “billionaire” who invested nearly half of his net worth after the hedgefund writedowns last yr…he is only half a man today.)
any thoughts on why aren’t others stepping in to buy bear sterns? at $2/share this seems like quite a good deal.
It wasn’t half his net worth, but it was a damn good amount of it.
cfaprincess Wrote: ------------------------------------------------------- > any thoughts on why aren’t others stepping in to > buy bear sterns? at $2/share this seems like quite > a good deal. imagine if you had a balance sheet where your assets were essentially worthless. A = L + OE right? so if assets were worth next to nothing, owner’s equity is zero (or close to it) given limited liability… so with 120MM shares O/S, is A-L> $240MM?
This bugs me. The only reason Bear is where it is today is that early last week some bozo at a research shop said they had a liquidity problem. This was total crap. Every firm on wall street relies on unsecured overnite repo and sec lending to fund the assets on their balance sheets. But when a statement like that is issued (with no basis), a few of the smaller banks/firms (frequently the japanese, korean, and other very small euro banks) pull their funding. Other increase their haircuts and pricing. Then the clients that serve as prime broker for pull their funds. Then word of the first group of banks pulling out spreads and few firms are willing to be the last one in and getting caught in a liquidation . (Even tho in many cases where brokers have gone under due to liquidity issues, and not a deficit in equity. Banks that lent to Kidder Peabody and Drexel when they unwound made killings.) If I were a shareholder I’d be pissed at the low price. Bear had hedged out all of its remaining exposure to subprime, and based on its earnings ability (albeit greatly diminished) deserve a valuation higher than $2/share. Forget about monitoring and investigating the ratings agencies, I’d like to see much more oversight on research analysts. I spoke to a [unnamed rating agency] analyst Thursday (before the blowup) and he had basically affirmed that after talks with the company their liquidity position was the same as what it had been when they issued their 11/30/07 financials, so what info was that research going on? What mosaic of info did he use?
cfaprincess Wrote: ------------------------------------------------------- > any thoughts on why aren’t others stepping in to > buy bear sterns? at $2/share this seems like quite > a good deal. Being that JPM bailed them out along w/ the fed I’m sure it’s only appropriate that they get first dibs. Also JP is their custodian so they already have ties… Anyone think if another major bank comes forth with huge losses tomorrow or this week, it could trigger a crash?
1moreQ Wrote: ------------------------------------------------------- > I still don’t believe this is happening. > > Last year i was offered a position with their MBS > bond repo desk which i turned down. Later regreted > it but am now sooo thankful. I can only imagine > the morale now. Poor folks. The Morgan folks must > be gloating…esp for getting in at $2/share Ha. This reminds me of last year how I was (and had been for like a year) “lusting” after Freddie Mac’s investment analyst position for new college graduates. They basically told me to go to hell. Two or three months later, half the office that I was applying for was laid off and those new hires were almost certainly among the casualties. I was soooo happy they told me to go to hell.
Re: Super I Thursday’s Heard on the Street didn’t help either… For now we can only speculate whether there were any liquidity issues prior to the rumors, and maybe we’ll find out the truth a few years down the line when someone writes on a book on this…
any rumours that someone else (if yes, who is a possibility?) will step in and up the bid? the deal is still pending SH votes even though both board of directors have unanimously agreed. there’s a 1 year window before the proposal lapses…
Yeah… like there is someone, anyone, on this planet with a lower cost of capital than the fed? Maybe some drunk arabs or money laundering chinese?
It would only be the Arabs lol. Either way JPM during the conference call repeatedly mentioned that this was the only choice they see for BSC shareholders, and they believe that shareholders will approve the transaction. Also JPM mentioned that they never wanted anymore MBS or anything mortgage related on their balance sheets, but the Fed is backing 20billion of the mortgage exposure, so this is why JPM made this exact transaction. Also mentioned was that every bank was given a chance to make a bid, but no one knew BSC better than JPM to do the due diligence for such a deal in 3 days time. They said they only been inside looking at the MBS financials for 1.5 days.
Super I Wrote: ------------------------------------------------------- > This bugs me. > > The only reason Bear is where it is today is that > early last week some bozo at a research shop said > they had a liquidity problem. This was total > crap. > > Every firm on wall street relies on unsecured > overnite repo and sec lending to fund the assets > on their balance sheets. But when a statement > like that is issued (with no basis), a few of the > smaller banks/firms (frequently the japanese, > korean, and other very small euro banks) pull > their funding. Other increase their haircuts and > pricing. Then the clients that serve as prime > broker for pull their funds. Then word of the > first group of banks pulling out spreads and few > firms are willing to be the last one in and > getting caught in a liquidation . (Even tho in > many cases where brokers have gone under due to > liquidity issues, and not a deficit in equity. > Banks that lent to Kidder Peabody and Drexel when > they unwound made killings.) > > If I were a shareholder I’d be pissed at the low > price. Bear had hedged out all of its remaining > exposure to subprime, and based on its earnings > ability (albeit greatly diminished) deserve a > valuation higher than $2/share. > > Forget about monitoring and investigating the > ratings agencies, I’d like to see much more > oversight on research analysts. I spoke to a > analyst Thursday (before the blowup) and he had > basically affirmed that after talks with the > company their liquidity position was the same as > what it had been when they issued their 11/30/07 > financials, so what info was that research going > on? What mosaic of info did he use? I couldn’t agree with you more. The fact of the matter here is that analysts tend to spew all sorts of nonesense when it suits them. Think of it from this analyst’s perspective… ‘hey, if I come out and say that BSC has got liquidity problems in this environment, than everyone’s going to bail out of it and I’ll have been the only pr^ck on the street to have called it… ergo my reputation as a pro picker will skyrocket. Worst case scenario, I was wrong and no one’s going to remember my comment tomorrow, so what do I have to lose? Nothing… super!’
Super I Wrote: ------------------------------------------------------- > This bugs me. > > The only reason Bear is where it is today is that > early last week some bozo at a research shop said > they had a liquidity problem. This was total > crap. > > Every firm on wall street relies on unsecured > overnite repo and sec lending to fund the assets > on their balance sheets. But when a statement > like that is issued (with no basis), a few of the > smaller banks/firms (frequently the japanese, > korean, and other very small euro banks) pull > their funding. Other increase their haircuts and > pricing. Then the clients that serve as prime > broker for pull their funds. Then word of the > first group of banks pulling out spreads and few > firms are willing to be the last one in and > getting caught in a liquidation . (Even tho in > many cases where brokers have gone under due to > liquidity issues, and not a deficit in equity. > Banks that lent to Kidder Peabody and Drexel when > they unwound made killings.) i agree with Super I here. i think his assessment is right on the money. i think at the time at which CEO alan schwartz attempted to quell investor concerns that the bank was still solvent early last week, he may actually have been right. granted, i’m sure we’ll see some class action lawsuits about this, but in fact i actually think he could have been telling the truth. however, with investment sentiment so negative and banks and hedge funds pulling their money out, this just drove the company into the ground. very unfortunate, to be sure, but it is very much true that a company is only as solvent as the *perception* of its solvency. > > If I were a shareholder I’d be pissed at the low > price. Bear had hedged out all of its remaining > exposure to subprime, and based on its earnings > ability (albeit greatly diminished) deserve a > valuation higher than $2/share. perhaps yes, but with what has happened to the bank over the last few days, i don’t think there is any equity value there. bear’s new york headquarters is valued at about $1bn but the liabilities of the company are so huge, it really then becomes a matter of what firm would be willing to take on the risk in order to shoot for a turnaround story. i thought maybe another bank might step in to top the JPM offer at one point, but i don’t think that will be the case anymore. > Forget about monitoring and investigating the > ratings agencies, I’d like to see much more > oversight on research analysts. I spoke to a > analyst Thursday (before the blowup) and he had > basically affirmed that after talks with the > company their liquidity position was the same as > what it had been when they issued their 11/30/07 > financials, so what info was that research going > on? What mosaic of info did he use? maybe none at all, unfortunately. further to the first section of my reply, if he were perpetuating rumors, that would obviously be disappointing…but again, in this case, it’s the perception of insolvency that eventually made the firm insolvent. this is really a sad end to a sad story, but i still think there is a lot of positive legacy in the bear name and hopefully its employees will eventually get back on their feet.
This really pisses me off. Bear stearns fall could have been prevented if the discount window was opened to them earlier. Yes they had less than reputable paper on the balance sheet but they say that most of it was written off. This was a liquidity crisis and if the fed had provided the liquidity to them as it did to commercial banks, Bear would have most likely survived. Having seen the building and trading floors…it boggles my mind that the real estate and equipment are worth over a billion but they got $2/share. Fed too slow. Now as many as 10,000 smart folks will not only loose their jobs but have wiped out pension accounts.
I am starting to think that $2 per share was just a made up number. Since JMP could not offer $0, and $1 seems like a joke…$2 was the next best. I will be surprised to see how JPM arrived at $2 per share from the book value of $84 that BSC supposedly had last Friday.
1moreQ Wrote: ------------------------------------------------------- > This really pisses me off. > > Bear stearns fall could have been prevented if the > discount window was opened to them earlier. Yes > they had less than reputable paper on the balance > sheet but they say that most of it was written > off. This was a liquidity crisis and if the fed > had provided the liquidity to them as it did to > commercial banks, Bear would have most likely > survived. Having seen the building and trading > floors…it boggles my mind that the real estate > and equipment are worth over a billion but they > got $2/share. well, what do you think their total liabilities are? it’s scary to think that the $2.00/share offer might be what seals the deal, but that might be what the bank’s really worth. i’m sure JPM had a good look at bear’s books before they made the offer.
wanderingcfa Wrote: ------------------------------------------------------- > I am starting to think that $2 per share was just > a made up number. Since JMP could not offer $0, > and $1 seems like a joke…$2 was the next best. > > I will be surprised to see how JPM arrived at $2 > per share from the book value of $84 that BSC > supposedly had last Friday. It’s not $2/share, it’s roughly .05 shares of JPM, which at the time was roughly $2.
Yea, that’s what I meant. Still, effectively little value.
Ok can someone please explain to me - BS owns a building in midtown which is worth over a billion dollars. Yes BS was just bought at less than 1/4 billion. How can that be? Do they really have such gigantic liabilities that they offset all of their assets including the real estate?