It's being reported that JP Morgan (JPM) is beefing up their offer for Bear Stearns to closer to $10/share—not a huge surprise considering the massive backlash from BSC shareholders at the thought of a $2/share offer. (The wisdom at the time being, I suppose, any offer is a decent offer. Indeed, an offer worth less than the very building you're occupying is not a decent offer under any circumstances. The shareholders realized this and weren't about to let JPM pillage in such a greedy, "let us rescue/rape you" manner.)
With that, I'm expecting a huge bump in BSC tomorrow. As such, I'm throwing $1,250 of my money and $1,000 of my brother's money into the pot at open, provided it doesn't gap up and over $10. In fact, I don't think I'll enter the position if it opens at anything greater than $8.50/share. (Note: my brother is in stock market class and has been following the BSC situation closely. I have also let him know that there is a VERY real risk he loses all of his investment, completely. He understands that and is willing to take the risk. The parents have given their blessing to him as well.)
Entering the position at more than $10/share would be a big error in my particular circumstance. While many are speculating that another offer may come through, or that JPM may strike closer to the $12-$25 range, I'm not looking to play that game. A lot of people who bought in at $4 are going to be happy that they've held on; their bets have paid off that a $2 offer wouldn't stand. Now we'll see another round of people looking for the same stroke of luck.
As the situation surrounding Bear becomes more clear and their liabilities and liquidity come to light, a more accurate value will emerge. Again, $12-$25 has been rumored by Barrons and CNBC. If that's the case, the stock could easily leap right over $10/share. Or it could spike to $9 and hover there while everyone figures out what's going on with this revised "deal."
This is all an elaborate guessing game. Clearly, the company is worth more than $2/share if their building alone is worth more than that. What everyone's gambling on is what is it *really* worth, to JPM or another suitor?
Game plan, if at all possible: Buy at open at market (assuming that's under $8.50), sell if it breaks $10 at all or crashes beneath what I entered at. (A 20% gain would of course be fantastic; buying at $8.50 means $10.20 hits the 20% threshold.)
Very real possibility: Pre-market trading and gapped demand will drive the open price up right around to $10. It will jump up a very small amount, but could also settle back in the $9 range. If that happens, we'll stay out of it altogether I think.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment