Finance Giant Goes for Peanuts
Posted on Mar 17, 2008
The mortgage crisis has claimed another corporate victim. Bear Stearns, one of the largest financial institutions in the world, has been bought for a piddling $236 million. The company was valued at $3.5 billion just a few days ago, and $20 billion a little more than a year ago.
The firm’s sale was enabled by a loan from the Federal Reserve that could add up to $30 billion.
Wall Street Journal:
Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed—after prodding by the federal government—to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.
Bear Stearns had a stock-market value of about $3.5 billion as of Friday—and was worth $20 billion in January 2007. But the crisis of confidence that swept the firm and fueled a customer exodus in recent days left Bear Stearns with a horrible choice: sell the firm—at any price—to a big bank willing to assume its trading obligations or file for bankruptcy.
“At the end of the day, what Bear Stearns was looking at was either taking $2 a share or going bust,” said one person involved in the negotiations. “Those were the only options.”