Today it is being announced that JPMorgan will acquire Bear Stearns for $2 per share. To provide a little perspective on the stunning collapse of Bear Stearns, you need to know where Bear Stearns has been.
A Little History
Bear Stearns is the country’s fifth-largest investment bank. Its stock was trading as high as $172 in January 2007. Last summer two of its hedge funds collapsed in the beginning stages of the subprime mortgage crisis that we are still going through. Its stock began a downward slide that became a freefall last week as investors began to doubt its viability as on ongoing business.
On Friday its stock plummeted nearly 50% and ended the day at $30.
We Don’t Know the Extent of Bear Stearns’ Problems
Now we have the news that it is being acquired for $2 per share. Clearly we have no idea of the seriousness of Bear Stearns’ problems. JPMorgan is willing to pay only $2 per share despite help from the federal government in funding the deal. We might suspect there was a fair amount of prodding from federal authorities to convince 
JPMorgan to do the deal. Without federal intervention I suspect JPMorgan would have offered considerably less.
At $2 per share JPMorgan will be paying $270 million. Bloomberg is reporting that the Bear Stearns headquarters in midtown Manhattan (pictured to the right) is likely worth several times that. Reading between the lines, Bear Stearns’ problems are much deeper than we know.
Poor Billionaire
The second-largest shareholder in Bear Stearns is a billionaire named Joseph Lewis. He paid as much as $150 per share as recently as September. He obviously believed in the company and wanted to help it succeed. His shares are now worth $2.
I feel bad for him just a little. But he’s still a billionaire. He’ll be okay.
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