Calling all Lawyers... The Bear Stearns Collapse

                        Another Enron on the Way?

Today's announcement that Bear Stearns will be acquired by JP Morgan/Chase is stunning on many levels. The most stunning aspect, though, may be the token price paid for the company: $2/share or $236 million.

That price is shocking simply because the company's stock closed at $30/share less than 72 hours earlier. That means shareholders have seen the market value of the company fall from a tad over $4 billion Friday to fifteen times less by Sunday.

Shareholder litigants are going to be talking about this one tonight and tomorrow. Let's recap the fall of Bear Stearns stock price and market value the last year:

• Stock price last year: $159/share - market cap: $18.76 billion
• Stock price last week: $69.75/share - market cap: $8.23 billion
• Stock price Friday: $30/share - market cap: $4.04 billion
• Acquisition price Sunday: $2/share - market cap: $236 million

When companies fail this spectacularly, management usually is culpable for a big piece of the precipitous stock drop. Enron immediately comes to mind.

The Bear Stearns situation is tied to the sub-prime situation and, like Enron and its special purpose entities, the role of Bear and its executives in this market problem will need to be examined further.

Lawyers, forensic accountants, forensic IT people and more will doubtlessly benefit from this failure but the losers will be Bear Stearns management and employees, the US Government, taxpayers and others. Corporate America could also be a big loser if this fiasco triggers another wave of governance legislation like the way Sarbanes-Oxley was spawned out of the Enron collapse at the beginning of this decade.

Are criminal indictments in the future?

(for more info, see: http://edition.cnn.com/2008/BUSINESS/03/16/stearns.morgan/?iref=mpstoryview )