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Banking Crisis 2008: Repricing the bank take-over candidates

Posted March 26, 2008

by J. Christoph Amberger

Baltimore — (TFN): After trading for over $100 a share, investment bank Bear Stearns recently sold out to JPMorgan for the firesale price of $2 a share — less than a bottle of water. Less than the value of its New York headquarters.

The deal could provide new leverage for the prospective buyers of other distressed banks. Why, for example, would anyone pay the current stock price of $4 for Countrywide Financial Corp. (NYSE: CFC)… which Bank of America agreed to acquire for $4 billion.

The other potential take-over target is SunTrust Banks Inc. (NYSE: STI). Priced currently at $54 a share, it would seem difficult to justify that price in the face of Bear Stearns’ $2 a share deal.

It’s time to re-apporach bank take-overs in this market. Instead of betting on share prices to increase in anticipation of take-overs, it may now be time to go short on banking stocks as soon as the word buyout is mentioned.
 

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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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