Bear Stearns at $2 Per Share?
Some in the satellite radio sector have complained about a diminishing valuation of the satellite radio stocks as the merger drags on and on, but what has happened to Sirius and XM pales in comparison to what has recently transpired with Bear Stearns. The investment bank, which has traded as high as $170 is now being sold for only $236 million to JP Morgan. This shows just how fast things can fall apart, and just how bad the sub prime crisis was.
Will investors be nervous on St. Patrick’s Day? You bet. Bear Stearns (BSC) closed on Friday at $30 per share. The Fed is backing up the deal, and Bear worked closely with the FED and JP Morgan throughout the weekend to avert a crisis. Whether or not a crisis has been averted will be told in the weeks to come. The Federal Reserve, partly behind the bailout of Bear, will provide up to $30 billion of Bear Stearns’ less liquid assets.
The Chairman of JP Morgan, Jamie Dimon stated, “JPMorgan Chase stands behind Bear Stearns, Bear Stearns’ clients and counter parties should feel secure that JPMorgan is guaranteeing Bear Stearns’ counterparty risk. We welcome their clients, counter parties, and employees to our firm, and we are glad to be their partner.”
Happenings such as this are sure to give any investor pause in the market conditions.
Position – Long Sirius, XM. No Position JP Morgan, Bear Stearns.
The question is; Will this credit crunch affect the financial viability of a merger. Tyler, do you think the financing will be there even if they get approval. I have some doughts if it gets much worse.
John…..
In my opinion, and based on how these types of situations typically happen, these companies have already worked a deal for the financing end of the equation.
Thanks for the response Tyler. I figured that they had financing set, but that was then and this is now. Do you know what I mean? Or do you think those obligations are set in stone.