Shares in Bear Stearns jump after hopes of better deal
Shares in Bear Stearns shares soared 23% yesterday to $5.91 as investors speculated on the outcome of JPMorgan Chase’s bid to buy the investment bank, which is subject to a shareholder vote.
At the weekend, JPMorgan agreed to buy Bear Stearns for $2 a share, a fraction of the $80 it was trading at this month, after Bear was unable to meet a surge in margin calls by investors who were worried about its ability to survive the global credit squeeze.
Nancy Havens, president and founder of Havens Advisors, a hedge fund that invests in takeover targets, said it is perfectly possible that the deal you see right now is not the deal you’re going to get. There’s every incentive for the shareholders to vote no the first time.
Some investors believe that a rival bidder could emerge. Others said investors who wanted JPMorgan Chase to win the deal were amassing shares.
Bear Stearns shares also surged as the broader US stock market notched its biggest one-day advance in over 5 years, following a deep interest rate cut and solid results from investment bank Goldman Sachs and Lehman Brothers Holdings.
Bear Stearns is Wall Street’s fifth largest investment bank and has been at the centre of the US mortgage debt crisis.
All banks, including Britain’s Big Four are at risk due to the credit crunch, say analysts.