Bear Stearns Collapses

[OneFootInTheGrave]

either it has structural problems, which does not seem likely at all, or this is some market manipulation of historical proportions... 50% value drop on nothing in two weeks?!? WTF is going on???

[Aeson]

Maybe JPM needs to salvage some more IB parts to stay afloat. :shrug:

[Aeson]

Just for tinfoil's sake...

JPM was at $36 when the Bear buyout happened. They bounced up to $48 a week later, and up to $50 a couple months later. Now they're at... $37.

[DanS]

Lehman's fall is very impressive. We may have to create a "Lehman Brothers Collapses" thread soon.

[Asher]

You guys are talking out of your asses.

Could you actually explain why Lehman is closer to collapse today than it was when Bear Sterns collapsed?

[Aeson]

- The obvious reason is stock price. You can poo-poo it all you want, but stock prices do matter. It's an asset for those who hold it, and Lehman holds at least some of their own stock. Having your assets depreciate is simply not good for the bottom line. It's also the market's evaluation of the health of a company, and perception does matter. It's also what dictates how much money you can make from offering more stock, influencing how much money you can raise that way. Lehman announced a couple days ago that they would be offering $4billion in stock to raise capital, at $28/share of common. (Another $2billion of preferred.) Who's going to buy $28 common when it's at $23? Right now their offering they hope to raise $4 billion with is worth $3.28 billion. That's a huge hit in 2 days, regardless of what they need/want the capital for.

- They said they were buying back their stock at $28-$34 last week. Either they lied about buying stock, or it was insignificant amount, or they took a hefty loss this last week. None of those options would make me think highly of them. 3 is the only straight loss, but 1 and 2 would make you wonder about what they were hoping to distract people from. Buying back your stock to "hurt the shorts" when you are offering $4billion to dilute your stock price seems... stupid at best.

- Their ~$3billion quarterly loss, which is obviously worse than their last quarter's ~$600million gain.

- Their attempts to raise the $6billion from Korea hasn't worked out.

- Lehman has been downgraded by Moody's, S&P, and just about everyone else. (Merril upgraded them last week, but took it right back off this week. Merril is in the running for the next Bear themselves.)

[Asher]

It was downgraded to an "A". Let's not overstate things.

[Aeson]

It's obviously a downgrade in rating. It's also not the only one. (Lots of negative stock ratings these days of course.) You asked why they were worse off... well that's one reason.

[Aeson]

CFO and COO at Lehman just fired. Maybe a good thing for Lehman, though premarket trading doesn't seem to have liked it initially. $3 went off the stock price instantly, now back up near the close just a few minutes later. All on massive volume for after-hours trading.

Should be a very interesting day.

[Japher]

I'm watching BUD today.

[Aeson]

Thinking the buyout might fall through?

[Japher]

I hope so. I don't own it, but have always thought it was a good buy. It has a great and rather consistent track record for the last 10+ years. This is a nice bump, but I hope they don't sell out to foreigners. It would really be a bad omen for the US economy, which is already hurting.

[Aeson]

Too bad you don't own it, will be selling for +$6 today.

[Japher]

Yeah, to bad. I have a good friend who bought it on my recommendation about 3 years ago. He's very happy.

My picks have done good for me.

[Aeson]

Cool

(Economic hard times, people still drink their beer... maybe even a bit more beer... right?)