Should You Buy Bear Stearns Stock?

One of my friends told me about an interesting phenomena that took place in his office yesterday.

Apparently, a bunch of the 20-something employees were all speculating in Bear Stearns stock. during the day. These employees were not stock brokers or traders. No, these are regular Chicago professionals that thought they could make quick money by, essentially, day trading in Bear Stearns stock while it “collapsed.”

The “deal” with JP Morgan was for them to buy Bear Stearns for $2 a share. Only, if you watched Bear Stearns stock during the day, you would have noticed it never got down as low as $2.

The stock traded between $2.84 and actually closed at $4.81.

Some people were making quite a bit of money today trading in that range, including a few of my friends’ colleagues who claim they made $1000 just by trading in the speculation in the stock.

Remember, the JP Morgan deal is just an offer. It hasn’t been accepted by the shareholders yet. Therefore, the stock can really trade at anything it wants until further notice. Normal supply and demand and short covering pressures will be on the shares.

There is a remote possibility, just remote, that the deal may never get approved by shareholders.

The Telegraph is reporting that British Billionaire Joseph Lewis, who owns a 9.4% stake in the company, may try to block a sale at the current price - wherein he is on the hook to lose a billion dollars. From Bloomberg:

Lewis is speaking with potential rival bidders and is considering a number of strategies, including voting against the deal at the scheduled shareholder’s meeting, the newspaper said, without saying where it obtained the information.

Easy come, easy go for the billion dollars?

There are others that have big stakes, including a former Chairman and several mutual funds.

Maybe it’s not so crazy to be trading in the stock after all?

Nah…it’s still crazy.

Leave the day trading stuff to the professionals. They always have more info about what is really going on than any of us do. They’ll eat your shirt for lunch on these kinds of trades.

Stay tuned.