"8:24. Good question about how to reconcile the alleged $80 per share book value and todays $2 per share price. JP Morgan doesn't say it directly, but Bear's liabilities must be severe."
"8:35. Bear Stearns does own it's building, which means JP Morgan is getting a huge piece of midtown real-estate as part of the deal. By our math (which is shaky even when we haven't been drinking all day), that means either the building or the business is worth something like negative $400 million."
The litigation risk is a huge component. There are going to be massive shareholder lawsuits (against both Bear and JPM) coming out of this. And who knows what kind of shady dealings at Bear might come to light during the acquisition? Dimon & Co. had only a weekend to put this deal together -- not nearly enough time to fully inspect Bear's books and to figure out all the risks of the trade. They had to set a price low enough to protect themselves.
Is all this stuff common knowledge amongst big firm traders, or Wall Street folks, or the financial sector at large? Are you just someone who follows the relevant -- and perhaps access non-layman -- information, or are you required to be sharp to know all this?
"8:24. Good question about how to reconcile the alleged $80 per share book value and todays $2 per share price. JP Morgan doesn't say it directly, but Bear's liabilities must be severe."
"8:35. Bear Stearns does own it's building, which means JP Morgan is getting a huge piece of midtown real-estate as part of the deal. By our math (which is shaky even when we haven't been drinking all day), that means either the building or the business is worth something like negative $400 million."