Yves Smith of Naked Capitalism submits:
Bloomberg tells us that Bear Stearns’ shares rose 13% on an analyst’s comments that the firm “may” have secured an equity investment.
Now events may prove me wrong, but Bear has been out looking for a partner for some time, and rumor was that the logical chumps, the Chinese, had wised up after the Blackstone IPO investment. And the wording of this supposed tidbit is awfully conditional.
No sensible investor would make a straight equity contribution (you’d want a preferred return, a board seat or two, vetos on certain matters), and Bear would therefore restrict his right to resell. Having an illiquid minority investment in any firm, much the less a securities firm, is not a pretty place to be.
Things need to get considerably worse for this sort of paper to be priced cheaply enough to be worth the risk. But those blood-in-the-street moments present opportunities galore for the brave, and I’m not sure where Bear would be on the list at that juncture.