Profiting from Different Types of Mergers & Acquisitions
By Ian Cooper, American Capitalist
By Ian L. Cooper
The country’s third-largest bank, Bear Stearns, just announced that the value of two of its hedge funds’ holdings are pretty much worthless after making wrong-way decisions in the mortgage business. Assets in one fund, worth $638 million at one time, are worthless. Assets in the other fund, worth $925 million at one time, lost 91% of its value since the end of April 2007.
In a letter to investors, Bear Stearns tells its now more-than-bitter investors, “The preliminary estimates show there is effectively no value left for the investors in the Enhanced Leverage Fund and very little value left for the investors in the High-Grade Fund as of June 30, 2007.”
In short, you, investors who have entrusted us with your hard-earned dollars, are now screwed.
Then, Bear Stearns, according to a commonly referred-to blog, tells its investors, “At this time approximately $1.4 billion remains outstanding on this line and we continue to believe there are sufficient assets available in the High-Grade fund to fully collateralize the repo facility.”
In short, you’re royally screwed. We, on the other hand, may not be.
In what was obviously a poor day for the third-largest bank in the country, the PR team may have found it apropos to step in and re-word the letter’s ending. Says the letter, as mentioned on Bloomberg.com, “Let us take this opportunity to reconfirm that the Bear Stearns franchise is financially strong and committed to meeting your investment needs. Our highest priority is to continue to earn your trust and confidence every day.”
Nice. Hey, we screwed you. But we may be okay. Can we still be friends
| |