It’s offical.  The powerhouse investment bank Bear Stearns has imploded and will be acquired by JP Morgan.  This last minute buyout, avoided a bankruptcy filing by Bear Stearns.

Just last Friday, Bear Stearns stock was valued at $30 per share.  Today, JP Morgan will pick up this battered investment banking company for just $2 a share.  Both JP Morgan and Bear Stearns have approved the deal.  Additionally, the US Government also quickly signed off on the sale.  All that is left to complete the buyout is shareholder approval.  About 1/3 of the Bear Stearns company stock is held by over 14,000 Bear Stearns employees.

The real losers in this deal will be Bear Stearns employees.  Besides losing huge sums of money in their retirement accounts, many will likely lose their job.  Since JP Morgan already provides many of the same services as Bear Stearns, there will be little need to keep most Bear Stearns employees on the payroll.

The US taxpayer is helping to pay for this buyout as well.  The Central Bank has agreed to fund up to $30 billion of Bear Stearns’ less liquid assets.

It is believed that if Bear Stearns had collapsed, a financial ripple effect would have went through the economy and global financial systems.  Such a collapse would have created huge losses for banks, hedge funds, and other investors.

If you would like to read more about this story, please click here.

Like it? Share it!