JPMorgan’s CEO, James Dimon, is playing the markets, press and Bears Stearns investors perfectly. He knows exactly what he is doing and is executing with precision. Yesterday we learned that JPMorgan sweetened the deal now to $10 USD a share, up from a shocking $2 original bid. Dimon was quoted in the Wall Street Journal as saying, ‘We took another crack at it to get it just right.’

Our theory is that Dimon knew all along that a $2 bid would have tremendous shock and awe value. In fact, he was counting on it. What better way to steal acquire Bear Stearns’ stock than to quintuple your original offer a week after the investors and the press couldn’t talk about it enough? Current Bear Stearns shareholders and investment bank employees had already calculated the fortune that got flushed down the toilet – now, hopeful again, they would be thrilled with any double digit stock price. A classic negotiating tactic is playing out before our eyes and, for most, the offer change comes as big news. We’re thinking this approach could go even further.

In mid-March, a beaten up Bear Stearn’s stock was nearly $60 a share. To think that JPMorgan (or anyone else for that matter) could pick it up for even $20 a share was unfathomable at that point. Now, even if Dimon takes another “crack at it,” he’ll be pleased as punch to take the stock at $15 a share – especially with the aid of the Fed. Dimon knows the potential upside and he’s already protected JPMorgan from the downside.

If JPMorgan’s target price for Bear Stearns was $12-15 a share all along, then anything less than that is simply icing on a very sweet cake.

John
Hedge Fund Jobs

A lot of commentary in the blogsphere, as I am sure you have noticed, is with you, yet I see very little in the way of criticism in the MSM. Are they afraid to cross swords with Masters of the Universe? Haven’t they figured out those days are over?

I’m actually starting to think these people have no idea what could come to them. The last time the country was in such a froth over financial shenanigans, the companies were called Enron and WorldCom, and last I checked, many of their executives (though not nearly enough are in jail, or facing trials, or were forced to give up most of their net worth.

If they feel entitled to sympathy, they can ask their dogs for it. The general public would rather compensate them with a lovely retirement package in scenic Rikers Island. And they might just figure out a way to do it too, especially if people keep complaining about share price when the Fed has just cleaned up $30bil of their mess.

As tragic as it happens to lose your life savings, a lot of businesses go bust. And these Bear guys impress me less and less the more I learn about them. They are unable (as a group) to analyze upside and downside, and failed to diversify their own portfolios. Many of the shareholdings were voluntary, not the result of deferred comp.

I don’t empathize with Bear’s employees (not only should their equity be wiped out, but their bonuses should be clawed back too, IMHO), but my honest advice to them would be to take whatever JPM offers. At this point, it’s a lesser evil than bankruptcy.

And at least one source (Steven Davidoff at the NY Times Dealbook) thinks this deal is more vulnerable to being upended than the earlier one.

So the spoiler would be Joe Lewis….

I wish you were right, but Dimon now believes he has the votes, and the shareholders’ meeting is April 8.

My prediction: if a deal isn’t signed, sealed, and executed by the time Congressional hearings begin, you can forget about it. And the way things are going, nothing will get done before then. (For once, I’m praying for more lawyers

But it is all so symbolically perfect, a shambolic, corrupt performance capping eight years of madcap semi-fascism, from the government agreement to take pills from pill companies at any price said company wants to set to a foreign policy that combines the morals of Blackwater and the intelligence of… George Bush.

Down the drain we go.

I’m no bk expert, but is it a given that the stock goes to zero? Especially when the employees own such a large chunk — 30% is the figure I recall for BSC. And wouldn’t BSC have access to the new Fed lending facilities for primary dealers — PDCF and TSLF? So maybe they could reorganize and resume operations as an independent firm pretty quickly, albeit a badly damaged one. It’s conceivable.

I still think the biggest fear on Wall St was that BSC’s portfolio would be marked to market in a bk procedure and this would then give a price to similar paper held by other market players.