The Bear Stearns investors nursing a hangover

With the announcement that JP Morgan is picking up Bear Stearns in a fire sale for a trivial $236m, aided by $30bn of funding from the Fed, several investors will be nursing some big losses given the $2 dollar share exchange this equates to. Bear Stearns shares had been trading on Friday at $30 dollars after sharp falls during the week, meaning the deal was at a 93 per cent discount to Friday’s closing price and had traded at $169 in Jan 07.

One is Joe Lewis, the British billionaire who, along with Daniel Levy, controls Tottenham Hotspur football club. He invested $860m for a 7 per cent stake in Bear Stearns in September 07. At the time he was reportedly worth $2.5bn.

A second is CITIC Securities. Last October, they and Bear Stearns announced a strategic alliance in a cross-shareholding deal involving investments of at least one billion dollars and plans to forge a banking joint venture in Asia. The deal was being re-negotiated in February following 50% falls in the share price of Bear Stearns. Citic’s stake was expected to be increased to 9.9 per cent of Bear Stearns. The US investment bank’s stake in Citic was expected to eventually be lifted to as much as 7.5 per cent, according to a report from China’s official Xinhua news agency at the time.

I'm still checking whether they are still a shareholder, but at the end of June 07, Putnam Investment Management was listed as Bear's largest institutional holder, with 6pc of Bear's shares.

Without the JP Morgan deal, Bear Stearns was a dead man walking and so shareholders will struggle to argue they could have done better than they have, despite the awful losses they have suffered.

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posted by John Wilson @ 8:40 AM Permanent Link newsvine reddit



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