Many people are calling it a bargain, others are calling it an absolute steal, whatever you want to call it Jamie Dimon and JP Morgan have picked up Bear Stearns under circumstances that as recently as last week no one would have thought possible. As I said in yesterday's post about Bear Stearns and their liquidity issues, Bear Stearns was telling the street less than one week ago that their liquidity levels were fine and were talking up the book value of the company. On Sunday night, JP Morgan agreed to buy Bear Stearns for $2 a share, or 90% lower than its closing level from Friday. The deal is an all stock deal and is 
expected to cost JP Morgan right around $236 million.
The turn of events from the last few days is nothing short of shocking. Bear Stearns is the fifth largest investment bank in the United States and most people would have had several other corporations listed in front of Bear as having serious liquidity issues from the credit crisis.
This deal allows JP Morgan to strengthen the companies investment banking division greatly. Bear Stearns is clearly full of plenty of risks and businesses that are worth next to nothing, but there are also other businesses that have been historically strong that JP Morgan could turn profitable within months. In fact, SeekingAlpha points out that JP Morgan essentially got every asset that Bear Stearns owns for less than 1/3 of the cost of the building those assets call home. JP Morgan has thus far come through the credit crisis virtually unscathed, especially when you compare it to its peers. Jamie Dimon and the executives at JP Morgan will now have to make the call regarding job cuts from Bear Stearns. Reports from CNBC and Reuters say that up to 50% of the Bear Stearns workforce may be laid off.
How did Bear go from being a market leader to worth nothing in no time? Clearly the company made huge bets in the mortgage area and when the value of these turned out to be virtually zero, the balance sheet was unable to withstand the pressure.
If nothing else this story should serve to let all of the doubters realize just how badly things are in corporate America right now. The fifth largest investment bank in the world has agreed to be bought for chump change because it had no other choice. Now the question everyone is asking is "who's next?" Stay tuned to GrowYourFunds as we will visit this question more in the coming days.
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