Hope springs eternal, and you have to admire the pluck of Bear Stearns (BSC) shareholders, who, just last week, were left for dead. Still, the hope that Bear will ultimately be bought for more than $10 is a hallucination.
JP Morgan (JPM) now owns 39.5% of the company–a mere 10.5% short of the voting power it needs to approve the deal itself.
Bear’s board members, who were just allowed to save face when the deal price was increased from $2 to $10, control about 5% of the company’s stock. Assuming those board members vote in favour of the deal (not a given, but at this point, a fair assumption), that leaves only 5.5%.
Bear employees, meanwhile, who once owned 30% of the company, have now been diluted down to about 20% (thanks to the shares issued to JP Morgan). Even if all employees vote against the deal, that still leaves about 40% of the stock. Between bondholders and credit-default-swap sellers who are buying the common to make sure the deal goes through, as well as shareholders who bought in at $3, it’s hard to imagine JP Morgan not finding that last 5.5%.