JP Morgan to Buy Bear Stearns for $2/Share
On the heels of the Fed’s bailout of Bear Stearns, JP Morgan Chase said Sunday that it has agreed to acquire Bear Stearns for $2 per share.
According to Reuters, Bear Stearns will remain open for business and the move was made to prevent a “fire sale” of Bear Stearns assets. Exactly what price would constitute a fire sale is unclear, as $2 per share seems pretty low for a company that was trading most recently at $30, and just Thursday at around $57. One year ago, the stock was hovering at around $150.
MarketWatch is reporting that the Federal Reserve will back approximately $30 billion of Bear Stearns’ less liquid assets, as agreed to on Friday.
This will likely have a deleterious affect on markets worldwide, as it is clear by the disconnect between Friday’s closing price and the final sale price that markets have not fully appreciated the amount of bad debt accumulated by financial institutions.