It's behind a paywall, but still an interesting stat. https://www.wsj.com/articles/congra...es-deal-discount-11577269801?mod=hp_lead_pos5
Eleven Years in the Making: Breaking Even on JPMorgan’s Purchase of Bear Stearns James Dimon got a $30 stock for $10. It took 11 years to close the gap. James Cayne, former chairman and chief executive of Bear Stearns, prepares to testify at a hearing held by the Financial Crisis Inquiry Commission in Washington, May 5, 2010. Photo: Kevin Lamarque/REUTERS By David Benoit Dec. 25, 2019 5:30 am ET When Stephen Bearce bought 100 Bear Stearns shares at about $30 each on Friday, March 14, 2008, he was betting the investment bank would be taken over and he would turn a quick profit. He was only half right. JPMorgan JPM 0.28% Chase & Co. struck a deal to buy Bear Stearns that weekend for a fraction of the price Mr. Bearce paid. It took until this month for him to break even. Eleven years after scooping up Bear Stearns, JPMorgan’s stock value has tripled, hitting an all-time high. It is up about 40% this year, beating the KBW Nasdaq Bank Index. The nation’s biggest bank is now worth about $430 billion, more than one-third larger than its closest competitor, Bank of America Corp. BAC 0.14% The gains mean JPMorgan Chief Executive James Dimon’s stake crossed $1 billion for the first time—not counting options and other restricted shares—and his purchases since the crisis have earned about $150 million. Mr. Bearce’s gains are far more modest. “It only took 4209 days but I am finally even!!!” the Virginia financial adviser wrote in an email, referencing the length of time that he has held JPMorgan shares as a result of the deal. While Mr. Bearce represents a narrow slice of investors who bought Bear Stearns shares just before the JPMorgan deal, there is a classic Wall Street lesson in his lengthy round trip: Money is made slowly and lost quickly. A U.S. two dollar bill is taped to the revolving door leading to the Bear Stearns global headquarters in New York, March 17, 2008. JPMorgan Chase & Co. had originally said it would buy Bear Stearns for $2 a share. Photo: Kristina Cooke/REUTERS JPMorgan shares plodded along for the better part of a decade but have doubled since 2016 as profits soared and postcrisis regulations loosened. Bank of America and Citigroup Inc. shares remain below their records, as does the KBW index. Just this month, the financial sector of the S&P 500 surpassed the record it set in 2006. Every other S&P sector had reached that milestone by the middle of 2016. “The largest banks are in the midst of some of the greatest structural change in their history,” said Mike Mayo, a bank analyst at Wells Fargo & Co. “Some banks are hitting all-time highs, but if you were involved in the troubled banks, it’s been a slog.” When the deal closed in May 2008, Bear Stearns investors got a little more than one-fifth of a JPMorgan share—worth around $9.35—per Bear share. (The original offer of $2 a share was later bumped.) This month, for the first time, 0.21753 of a share of JPMorgan was worth $30, Bear Stearns’s closing price the Friday before the deal was announced. Mr. Bearce, 50 years old, has a few extra dollars now. He considered selling for tax purposes but decided to keep the position as a memento. “I tried to catch a falling knife,” he said. “I’m going to keep reminding myself how dangerous knives are. Let this be a lesson.” The pain was worse for many others. Bear Stearns shares lost two-thirds of their value in the month before the deal was struck. Longtime CEO James Cayne sold his entire stake before the deal closed when the shares were trading at around $10. What JPMorgan got from Bear Stearns is a complicated calculation. Most Bear Stearns employees didn’t stay, and JPMorgan has paid billions of dollars in mortgage-related settlements tied to Bear Stearns and Washington Mutual Inc., its other crisis-era deal. Mr. Dimon has said he wouldn’t do the deal again. Still, Bear Stearns expanded JPMorgan’s investment-banking and trading operations, especially those that do business with institutions and hedge funds. There have been other benefits, as well: This year, Mr. Dimon and his lieutenants moved into the old Bear Stearns headquarters while JPMorgan tears down its offices across the street to build a 70-floor skyscraper. Some analysts doubt that JPMorgan stock will continue to outpace rivals next year. It is trading at 5% above the average analyst price target of nearly $130, and more analysts have a “hold” rating on the shares than a “buy” recommendation, according to FactSet. KBW analyst Brian Kleinhanzl recently downgraded the stock. “We usually classify JPM as a best-in-class stock that investors can own over a long time period, but over the next twelve months we do not expect shares to outperform,” he wrote. “We believe the recent move in shares has pulled forward some of next year’s gains.” Mr. Bearce said he has no plans to sell. “It will be a story to tell my grandchildren,” he said.
If JPM hadn't screwed up the deal and the original $2 bid stood, they would still have a long way to go.
“I tried to catch a falling knife,” he said. “I’m going to keep reminding myself how dangerous knives are. Let this be a lesson.” ...
Maybe iv missed, - how big of a position he took in it, based on his portfolio ? All in ? Or was that, a 10% - 20% bet ? Warren made 10x on BAC if im correct. Would be a nice case study, for major differences.
it doesn't really matter how big he was. My point is that the falling knife statement is way overplayed. He took a binary bet that Bear Stearns would be survive, or it wouldn't. Mr Market said BAC was going bankrupt, but it survived. Mr Market said that BSC may not survive (but it might), and it didn't.
No. My point is that he made a binary bet and it didn’t work out. It has nothing to do with falling knives.
It was not a screw up. JPM wanted to close the deal very quickly and didn't want bidders coming out of the shadows. $2 was a low ball bid pulled out of hat.