Bear Stearns and JPMorgan Chase & Co. (JPM) were close to an emergency buyout deal Sunday night aimed at averting further panic in the financial markets, media reports said.
The Wall Street Journal reported JPMorgan would buy Bear Stearns for a per share price that is likely to be "considerably less" than the $30 the stock closed at Friday. Turns out it was for $2 per share!
Among the Wall Street investment banks, Bear Stearns was the most closely exposed to the mortgage crisis. The collapse of two of its hedge funds last summer was seen by many as one of the triggers of the current credit crisis.
The Journal also reported that were a deal with JPMorgan to fall apart, Bear could conceivably file for bankruptcy late Sunday before Asian financial markets opened.
As the assimilation proceeds, the financial industry wants to know exactly how badly Bear Stearns bet on mortgage-backed investments. Unwinding the nation's fifth-biggest investment houses should provide some insight into what other financial institutions might have on their books.
JPMorgan's acquisition of Bear Stearns for the shockingly low price of $2 per share, or $236.2 million, occurred Sunday night, in a deal that was fast-tracked by the federal government to avoid a bankruptcy. A complete collapse of Bear Stearns might have completely crushed the already-dwindling confidence in the global financial system, which has frozen up after last year's collapse of the subprime mortgage market.