Ace's Terrible, Horrible, No Good Very Bad Day: What a Bear!

Poor Ace Greenberg. Here is a guy - no, a legend - that helped shape the world of block trading and merger arbitrage on Wall Street. THE guy corporate chieftans and major investors would call when they needed to accumulate or move a large chunk of stock. An incredibly philanthropic guy, a guy that forced charitable giving among the most highly compensated members of his firm. He didn't say where it should go, only that it should be done. A world-class bridge player, Ace would sit on the desk just like all the other equity trading denizens and do business, business that he did very, very well for decades. He was CEO at Bear Stearns for 15 years (1978-1993) and Chairman for 16 (1985-2001), and put his mark on the firm in very tangible and very spiritual ways. Sure, Bear wasn't the biggest, didn't have the best banking, didn't underwrite the most bonds, but they were a solid firm with a strong trading and risk management culture. And they made it work for decades. And today Ace is watching the firm he built and grew crumble all around him. And I really feel badly for him.

Consider this: the stock is down around 55% over the last 12 months. They have litigation overhang relating to their hedge fund fiasco. They just lost their CEO, Jimmy "J" Cayne. Morale couldn't be lower. Employees' options are all grossly underwater. Who is going to buy Bear right now? I'll tell you who - precisely nobody. Why? Because isn't it better to pick off top talent free and clear of litigation and integration headaches while they are both pissed off and leaving little money on the table? It is similar to doing an asset purchase versus a stock purchase; when you buy the assets you leave the liabilities behind, while buying the stock is a much dicier proposition. Maybe I'm wrong and one the big SWFs will swoop in to buy Bear on the "cheap." But don't bank on it. This is a firm in deep, deep trouble that will likely need to scale back big time and get back to its roots, because it can't pay everybody and those of quality whom it can't pay will leave. I'm sure Ace can hardly believe what his beloved firm has become, and to be honest I can't really believe it, either.

Comments

[dave]

That Jimmy the J lasted this long is a complete indictment of the Board. His conduct and lack of leadership was disgraceful. Next up the DOJ, if Bear's not careful they might get the Anderson treatment.