Jamie Dimon Dances With Bears, and a Correction
Time for a Deal?
By blackhedd Posted in Bear Stearns | Economy — Comments (2) / Email this page » / Leave a comment »
I'm writing this at 5:30pm EDT on Sunday. It's early Monday morning in Asia, and financial markets there will be open for trading in a few hours.
It's quite likely that by the time you read this, the Bear Stearns Companies will either have been acquired by JP Morgan Chase, or will have announced a bankruptcy filing.
The total value of Bear Stearns's outstanding stock was a bit more than $4 billion at the end of Friday. The company owns a building on Madison Avenue that is worth a bit more than a billion dollars, and (more importantly to Morgan CEO Jamie Dimon) is a lot nicer looking than JP Morgan's building around the corner.
Bear also has a prime brokerage business and other assets that are worth maybe another billion. Considering that Bear has a stated book value of around $80 a share (more than ten billion dollars), this acquisition is going to be one of the all-time historic fire sales.
What might get in the way? A lot of things. One of them is that Dimon doesn't particularly like Bear Stearns. Lots of people on Wall Street don't, as a matter of fact. When Bear Stearns was a powerhouse, they acted like one, and didn't worry about the ill-will they often generated. (Such as in the Long-Term crisis.) Chickens are coming home to roost.
Correction: in a comment to an earlier post, I mentioned that China's government owned a one-billion stake in Bear Stearns, through its Citic Investments entity. Since then I've learned that this deal has not closed, despite a mad dash this week to do so by a Bear vice-chairman with a close personal tie to the boss of Citic. The Chinese are already feeling sheepish after buying into Blackstone Group. Closing the deal with Bear would have made them look like idiots.
Stay tuned.
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Jamie Dimon Dances With Bears, and a Correction 2 Comments (0 topical, 2 editorial, 0 hidden) Post a comment »
The winners are as always the ones left to pick up the pieces.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
Jamie Dimon is certainly having the last laugh on a lot of people: his colleagues at Citi (especially Prince), the people he shook up at JPM Chase, and now maybe Bear.
I'm not sure how a brokerage company could be run in bankruptcy. You would have to have a flexible judge approve a very flexible set of first day orders- the paper that allow a firm to pay people at the inception of the bankruptcy.
I guess the swap books could be sold, at least the ones where Bear is not one of the ultimate counterparties, depending on the credit status of the guys who ARE same.
Bear's investment bankers - largely toast, you think?