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The Bear Stearns (NYSE: BSC) deal happened fast, almost overnight. Some analysts think buyer JP Morgan (NYSE: JPM) got a great deal because the Fed is backing almost $30 billion of Bear Stearns asset values. Within days of an announcement of the buyout, the big bank had 39.5% of BSC shares, a lien on its headquarters, and a very firm deal at $10 a share.
According to The Wall Street Journal: "Indeed, it's possible a Delaware court could find these features coercive, and depriving shareholders of a true vote." It is true that Bear's shareholders did not have much time to consider the idea. The Fed and JP Morgan would argue that there was not time. The brokerage was about to go under.
As is true with most visible deals that involve shareholder rights and employment, Congress may decide that it wants to look at the transaction, as if it did not have better things to do.
The perverse argument here is that shareholder rights trump the company's survival. It leads to a conclusion that the holders of Bear Stearns stock should have been able to accept or reject the JP Morgan bid, even if it caused Bear Stearns to go under. In essence, shareholders have the right to lose all of their money, if they wish.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
3-25-2008 @ 9:40AM
william lindblad said...
No chance that Congress will get involved. I don't hold Barney and his committee in high esteem as they could have stopped this whole mess. Although most like to point the finger at Greenspan an Bernanke the truth is that the Fed only was empowered to stop unfair lending practices (1994) and anything else would have been suggestive. If you have no teeth - why try to bite? Case in point here is that IF Congress were to get involved, it would be a de-facto countermand of the Fed which could undermine it's credibility. Given that, all responsibility would than fall on Congress and if the economy goes South the public will remember comes Nov. It's and election year. We have the Democrats controlling Congress and a Republican in the White House and both parties have no desire to become the goat of the other. If the shareholders have a complaint - better try the courts.
Since the taxpayer and mainly our youth will be the ones holding the bag for this bailout it is hard for me and the rest of the public to be too sympathetic. If you want secure conservative investments - they are available. If you want big profit and risk??? T.S.