Staff at Bear Stearns have lost more than $5.2bn (€3.4bn) on their holdings in the company after the beleaguered US investment bank was sold last night for the knock-down price of $2 a share to JP Morgan Chase. The sale price is 98.7% below where the shares were trading as recently as April last year.
“Insiders” at Bear Stearns, including directors and employees, own 38.7% of the bank’s shares according to Thomson Financial. They will receive around $90m for their shares under the terms of the acquisition by JP Morgan Chase, compared with $5.3bn when the shares were trading at $100 in December last year. Other big losers from the collapse of Bear Stearns after 85 years include Joe Lewis, the secretive British billionaire, who has lost an estimated $1.16bn on the stake he built up in Bear Stearns last year. He bought 11 million shares last year at an average price of $107m, worth $1.18bn, according to regulatory filings. His stake will be worth just $22m under the terms of the sale. James Cayne, chairman of Bear Stearns whose Wall Street career has ended in ignominy, has lost $550m from the collapse, compared with a share price of $100 per share and as much as $883m based on the 52 week high for the shares of $159.36 in April last year. Cayne owns 5.6m shares in Bear Stearns, according to regulatory filings. Alan Schwartz, chief executive of Bear Stearns, has seen $100m wiped off the value of his 1.03m shares in the past three months, and has lost $162m in the past year. Institutional investors who have been hit by the collapse – based on regulatory filings as of the end of December 2007 - include Morgan Stanley with 5.4%, Legg Mason with 4.8%, Private Capital Management with 4.7%, Barclays Global Investors with 3.6% and State Street Global Investors with 3.0%. The collapse of Bear Stearns will be felt particularly hard by the bank’s 14,150 staff, who own a high proportion of the bank than any other Wall Street firm. According to filings, the Bear Stearns Companies 2008 Trust owns 27.3m shares on behalf of employees. These will be worth just $55m under the terms of the sale, compared with $2.7bn just a few months ago. JP Morgan Chase announced the rescue of Bear Stearns late on Sunday after a weekend of intense negotiations with Bear Stearns management and the Federal Reserve. The sale, which was concluded just before the Asian stock markets opened on Monday morning, came just two days after JP Morgan and the Federal Reserve of New York extended an emergency $200m credit facility to Bear Stearns last Friday. JPMorgan Chase has guaranteed the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. Other than shareholder approval, the closing is not subject to any material conditions. The Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other federal agencies have given all necessary approvals. In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to $30 billion of Bear Stearns' less liquid assets. Jamie Dimon, chairman and chief executive of JP Morgan Chase, said: "JPMorgan Chase stands behind Bear Stearns. Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk. We welcome their clients, counterparties and employees to our firm, and we are glad to be their partner." Schwartz, chief executive of Bear Stearns, said: “The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome for all of our constituencies based upon the current circumstances. I am incredibly proud of our employees and believe they will continue to add tremendous value to the new enterprise."
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