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Good point. The JPM deal for BSC is an all stock buyout that was
valued at $2 at the time it was announced. Because of fluctuation
in the price of JPM stock there is the possibility of an arbitrage play
with BSC shares.
Boater805
At 08:26 AM 3/18/2008, you wrote:
I believe the takeover price
(more like the give away price) is not an absolute amount of $2, but is
linked to JPM price. JPM has gone up from 37 to 42.5 today, hence the
rise in BSC ( I THINK). BSC is abotu 7 now, 50 million shares in
less than 2 hours. Who's buying? Who's dumping? All those BSC
employees ... shattered... their investments and savings down by 90%.
Best wishes to them.
Code 2 <Code2@xxxxxxx> wrote:
- Okay, I'm trying to understand why Bear Stearns is trading at
3-1/2
- times the JP Morgan takeover price.
- The market obviously thinks that Bear Stearns can make it on its
own
- (with the help of the Fed discount window, of course) or that
there
- will be a white knight who will offer a better price.
- However, the Fed isn't in the game of financing takeover bids, so
one
- would assume that any new offerer would not have the Fed's $30
billion
- of non-recourse BSC debt guarantees behind it, as with the JPM
offer.
- That effectively raises the price for BSC by $30 billion.
- So, perhaps the Fed doesn't care, because it has accomplished what
it
- set out to do -- with JPM's help, it created a backstop for the
credit
- markets. BSC and the credit markets will not collapse because JPM
and
- the Fed guaranteed the BSC debt until JPM completes the
takeover.
- However, if JPM is outbid or the markets settle and realize BSC
can
- make it on its own, BSC and the credit markets will not
collapse.
- Voila, either way the credit markets survive and Ben Bernanke is
a
- hero.
- The next leap in logic is that the Fed has signalled that it
will
- backstop the debt (but not the equity) of all too-big-to-fail
- institutions, like Bear Stearns, Lehman, Fannie Mae and maybe
UBS.
- Perhaps that's the buying opportunity in all this.
Never miss a thing.
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