Bear Stearns Companies Inc. (NYSE: BSC) is getting a $1 billion investment from Chinese investment bank Citic. The only catch is that Bear Stearns has to invest $1 billion in the Chinese company. Citic can buy as much as 9.9% of Bear Stearns if it wants to.
Why swap money? That's a good question. Bear Stearns' stock is flat today, trading around $116.50, not far from its low and a great distance from its 52-week high of almost $173.
The Wall Street Journal says that "the investment highlights China's increasing financial prowess on the global stage, and the eagerness with which Western firms are hoping to penetrate the insular Chinese financial sector." But there is no reason to believe that trading investment dollars will do anything to achieve that.
Citic is a big underwriter of Chinese IPOs. How that helps Bear Stearns is bit of a mystery. If Citic wanted make a big push into the US market, it should have cut a deal with a first-tier firm like Morgan Stanley (NYSE: MS).
The lackluster reaction of Bear Stearns' stock price today shows the market does not think much of the deal. It shows that investors have sense. There is no there there.
Douglas A. McIntyre is an editor of 247wallst.com.
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