$2 Can-Lah... Cannot-Aah? ... Then $10-Lah Can Or Not?

Following the pretty ridiculous US$2 big by JPMorgan for Bear Stearns, shareholders have been up in arms. After less than 10 days, JPMorgan Chase is in talks to increase its offer for Bear Stearns to US$10 per share in an effort to pacify angry shareholders of Bear Stearns, the New York Times reported in its online edition.

"The Fed, which must approve any new deal, was balking at the new offer price on Sunday night after several days of frantic, secret negotiations," the newspaper reported, citing people involved in the negotiations. The New York Times said a spokeswoman for JPMorgan declined comment and added that a representative of Bear Stearns could not be reached. On March 16, the stricken Bear agreed to a US$236 million all-stock buyout by JPMorgan, valuing the company at about US$2 per share. That value has since risen to about US$2.52 per share because JPMorgan stock has since risen.

Bear shares closed Thursday at US$6.39, a premium to the merger price, because some investors hope the company will find another buyer or JPMorgan will increase its offer. However, that is unlikely to happen because JPMorgan has the Fed standing behind them in the deal, and will basically provide up to US$30bn should Bear Stearns require it. New bidders will not have that luxury.

The incredible thing about JPMorgan and the Fed in this turnaround is the sheer audacity in allowing JPMorgan to bid US$2 for BS, and expecting everyone to pat them on their backs for a great deal - basically fucking up the minority shareholders royally in the process. The audacity and irony of the matter was further reinforced some 10 days later: now you have JP Morgan cowering and willing to offer up to US$10 for BS to placate shareholders!!! In just a matter of days, you up your offer by 500%, so that means the US$2 offer was a pasar-malam offer in the first place??!! Where got class man?

But who cares about class, Jamie Dimon almost got away with it. If there is anyone to blame for this fiasco, its the Fed (again). Its ok to stand for US$30bn behind the deal, and also ok to pick JPMorgan as the buyer - but at least do some simple due diligence and fair valuation for BS' shareholders, as JPMorgan needed the Fed to ok the deal and the line of credit, thus having the final say. The Fed had the last say in getting a fair deal for BS. From US$2 to US$10... everybody looked bad.

JPMorgan looked like a scavenger but cannot fault Jamie for being aggressive and opportunistic. The Fed now looked to be trying to just get BS out of bankruptcy by hook or crook, and kowtowing to all JP Morgan's demands - no one smart enough at the Fed to ask for a counter bid, can invite Bank of America also-what. No one at the Fed smart enough to get one or two independent valuations from accounting firms on BS?? You'd think you were in Malaysia (pre-2008 elections-la).