When is the deal expected to close? Also, if the above is true and JPM is still buying at $2 (and factoring in JPM's stock increase), why wouldn't people be selling calls at $5 or buying puts? Seems like easy money and I know no money is easy so I am obviously not thinking about something...
Good questions. I think it's all up in the air given that a vote has to take place and maybe because some of the lawsuits that have been filed have been asking for injunctive relief and TROs and such.
Okay, I'm in on some bull puts on BSC. There's way too much noise now for this to go through cleanly the way JP Morgan, creditors of BSC and, apparently, the fed, had hoped. And besides, big institutional firms that held large blocks of BSC have joined with Lewis and BSC employees. THIS IS ONLY GOING TO GET MORE INTERESTING. JP MORGAN AND OTHER FORCES TRIED TO PULL A RABBIT OUT OF THE HAT. '36 hours due diligence,' 'Jamie Dimon was about to walk away from the deal...' my ass. Check this out, too: http://www.bloomberg.com/apps/news?pid=20601109&sid=a6a7kbyqFJsc&refer=home As Bear Stearns Implodes, Spector Keeps $382 Million (Update2) By Yalman Onaran March 19 (Bloomberg) -- Warren Spector, forced out as president of Bear Stearns Cos. last August, may have outdone his former mentor James ``Jimmy'' Cayne as the 85-year-old brokerage firm imploded. After a spat over politics in 2004, Cayne, then Bear Stearns's chief executive officer, changed the company's deferred compensation plan, prompting Spector to sell $382 million of stock. As of last March, his stake in the New York-based firm had dwindled to 0.06 percent, worth about $8 million when he left. ``In this case, the golden handshake didn't turn into a tin one,'' said Shaun Springer, chief executive officer of London- based recruiting firm Napier Scott Executive Search Ltd. Spector, 50, faced Cayne again in a bridge tournament in Detroit last weekend. As the competition was coming to a close, Bear Stearns was being sold to JPMorgan Chase & Co. for $291 million, less than the value of its Manhattan headquarters building. Cayne's 5 percent stake has plummeted in value from almost $1 billion last year, when the shares reached their peak price of $170, to about $12 million based on the sale price. Cayne, who remains non-executive chairman after stepping down as CEO following an $854 million fourth-quarter loss, bested Spector in Detroit, ranking 65th of 3,555 players in the 11-day tournament. Spector came in 146th. The men participated in two legs of the tournament together, though they never played against each other, according to American Contract Bridge League statistics. Cayne, 74, outperformed his former colleague in both series of games. Hedge Fund Collapse Cayne blamed Spector for the collapse of two Bear Stearns hedge funds that had invested in mortgage-backed assets and lost $1.6 billion of investor capital last July. The funds' meltdown tarnished the firm's risk-averse reputation and triggered a repricing of mortgage-related securities that has produced more than $195 billion of losses at banks and brokers worldwide. Before being ousted, Spector was viewed by analysts and shareholders as Cayne's heir apparent. Instead, Cayne wound up turning to Alan Schwartz, an investment banker and 32-year veteran of the firm. Schwartz continued to negotiate deals after becoming CEO, as recently as two weeks ago being hired by Microsoft Corp. to advise on its attempt to buy Yahoo! Inc. Schwartz, 57, was forced to accept JPMorgan's $2-a-share offer over the weekend after a run on the securities firm threatened it with bankruptcy. Bear Stearns rose to $5.91 in New York trading yesterday as traders bet shareholders will hold out for a higher offer. A few dollars more a share wouldn't help Cayne recoup his loss on the stake. Spector probably lost about $23 million due to a stock award he was allowed to keep when he left, based on information from a Nov. 15 filing with the U.S. Securities and Exchange Commission. The shares, valued at $100 each, are scheduled to vest in June.
UPDATE: Bear Debt Holders May Be Buying Shares To Try To Sway Deal Vote 8:16 AM ET - Dow Jones News By Alistair Barr SAN FRANCISCO (Dow Jones) -- Bear Stearns debt holders are so keen on the J.P. Morgan Chase acquisition that they may be resorting to an extreme measure to ensure the deal goes through, analysts said on Tuesday. Investors in the bonds and other debt of the beleaguered broker may be snapping up shares of the firm. As shareholders, they'll be able to vote for the deal, giving it a better chance of closing. Bear shares jumped 23% to $5.91 on Tuesday. That's considerably more than double J.P. Morgan's offer price, which stood at $2.34 a share at the close of trading on Tuesday. Bear shareholders, shocked by the sudden drop in the value of the firm's stock, may be considering voting against the deal, hoping that if credit markets calm down in coming months they can extract a higher offer from J.P. Morgan or woo another bidder. But if rival bidder doesn't materialize and J.P. Morgan (JPM) stands firm, the alternative may be bankruptcy for Bear. That may be the worst outcome for debt holders. Buying Bear shares, even at elevated levels, to vote for the current deal, may be worthwhile to avoid that messy outcome, according to some analysts. "Bear debt holders may be buying Bear shares to ensure that the proposed transaction, which is favorable from their perspective as compared to a standalone Bear, closes," Chris Young, head of M&A at RiskMetrics, said in a note to clients on Tuesday. "I have heard that rumor too. It reflects the desire of bondholders to see the deal go through," Kathleen Shanley, an analyst at Gimme Credit LLC, said. "That's certainly the preferred solution for the bondholders." J.P. Morgan has guaranteed all of Bear's (BSC) trading obligations, but the giant bank is not guaranteeing the firm's debt. While unsecured Bear bondholders didn't get a guarantee from J.P. Morgan, the bank stressed that it plans to acquire and assume the firm's entire capital structure, David Hendler, an analyst at CreditSights, wrote in a note to clients on Monday. "Bear bondholders should receive at a minimum implicit J.P. Morgan support if/when the deal closes," he explained. But it may be difficult for bond holders to buy enough Bear shares to influence the vote, Shanley noted. "The stock is widely held by employees and there are a number of large shareholders of record too," she said in an interview. However, Bear shares have traded heavily since the J.P. Morgan bailout was announced on Sunday evening, suggesting the firm's investor base may be changing rapidly. "Extremely high trading volume since announcement implies a significant change in the company's shareholder base, with a likely shift to shorter-term traders from longer-term investors," Young said.