Jim Cramer is the new Michael Fish.
No! No! No! Bear Stearns is fine. Do not take your money out…Bear Stearns is not in trouble. I mean, if anything, it’s more likely to be taken over. Don’t move your money from Bear. That’s just being silly. Don’t be silly.
Alas it was not so. And Calculated Risk has the picture to prove it.
How then did Bear end Monday at $4.81 a share? In the bonkers world where the Dow finished the day up 21 points, on the promise of more feel-good freebies from Ben Bernanke and chums, anything is possible.
But some investors simply don’t believe that the business is going to go for the $2 a share that JPMorgan have put up, says Felix Salmon.
There’s some leeway timing wise built into the deal structure, so the attitude of shareholders depends rather on what happens between now and when a vote comes to pass. Andrew Clavell thinks it would be turkeys voting for Christmas.
Roger Ehrenberg thinks, regardless of the pain for shareholders, a vote against the deal is very unlikely. Either way, it would take investors 12 months to reject the deal finally.
So what about the various rumoured counterbidders in the wings? Bear can’t shop itself around but it can consider a better offer should one materialise.
But the WSJ’s deal tick-tock makes clear how hands on the US government was in these negotiations - in pressing JPM to take the entire firm, rather than cherry pick, in putting up $30bn to complete the deal, and in sugar-coating the purchase with some unusual features.
In addition to its option to purchase Bear’s headquarters building, J.P. Morgan has the option to purchase just under 20% of Bear Stearns’s shares at a price of $2 each. That feature gives J.P. Morgan an ability to largely block a rival offer, says a person with knowledge of the contract.
The value of that building is now the subject of some debate - but the ability of any potential Bear suitor to replicate what has just gone on over the weekend must be in doubt.
Either way, JPMorgan may need its $6bn pot for deal costs. The lawyers are circling. Paul Kedrosky has found they’re already out there looking for the aggrieved on Google and elsewhere there’s websites up and running for those seeking legal representation.
Alea thinks they might have a point.
Related links
The Abnormal Returns Bear Stearns round-up
