Chairman at Bear Stearns Sells Stock
On March 27, 2008, James Cayne, Chairman of Bear Stearns Cos Inc (BSC) sold $61.3 million of his shares of the company. As a result, the bank’s shareholders are unlikely to get a higher price for their shares.
JPMorgan agreed earlier this week to increase its original bid for Bear Stearns, which had faced a run on the bank and was close to collapse. Some investors were clearly hoping JPMorgan Chase would increase its bid again, or that Bear Stearns would find another buyer, because Bear Stearns shares closed on Thursday at $11.23 on the New York Stock Exchange, about 20% above the current value of JPMorgan’s offer.
If getting a higher price were likely, Cayne would be unlikely to sell his shares.
Bear’s share price fell about 5% in after market trading to $10.68. The share sale took place on March 25 but was disclosed in a document after the market closed on March 27, 2008.
JPMorgan Chase’s sale is expected to close by mid-June, assuming a majority of shareholders approve it.
The banks helped ensure the deal would be approved earlier this week when JPMorgan agreed to buy 95 million newly issued Bear Stearns shares, equal to a 39.5% stake in the company.
Bear’s board members agreed to use their shares to vote in favor of the deal. It is not clear who bought Cayne’s shares.
Cayne in January stepped down as chief executive after nearly 15 years at the helm of what was once the fifth-largest investment bank in the United States.
Bear Stearns experienced a run on the bank earlier this month as clients withdrew funds and the investment bank lost access to a form of secured financing known as repo funding.
Bear Stearns, once the fifth-largest U.S. investment bank, earned most of its profit from U.S. bonds, and had a large mortgage-backed securities business, which made some investors concerned about its stability.