Business

WALL ST. DAZED

Bear Stearns’ fire sale to JPMorgan Chase for $236 million – less than Yankees star Alex Rodriguez’s historic contract – helped push down shares of financial companies yesterday as investors searched for the next victim of the global credit crisis.

The price JPMorgan chief Jamie Dimon was willing to pay for Bear shows US financial companies are “significantly overvalued” and may drop another 50 percent, according to Merrill Lynch’s Richard Bernstein and Oppenheimer’s Meredith Whitney.

Oppenheimer suspended its morning comment in honor of Bear and sent out a note with reprinted lines from Alfred Lord Tennyson’s epic poem “In Memoriam” – a death eulogy.

JPMorgan’s deal for Bear, the fifth-largest US securities firm, will cause a “major negative revaluation” of financial shares, said Whitney, who jumped ahead of the analyst pack last year and correctly predicted Citigroup would be forced to reduce its dividend this year.

“Bear Stearns’ demise should probably be viewed as the first of many,” Bernstein wrote in a report yesterday. “Assets remain overvalued, earnings momentum is weak and sentiment is just beginning to catch on as to how broad and deep the credit market bubble has been.”

Lehman Brothers bore the brunt of the negative sentiment yesterday, dropping as much as 40 percent until investors jumped in to buy shares.

Lehman, which said it does not have liquidity problems, eventually ended down 19 percent.

Rival Merrill Lynch, whose chief John Thain said over the weekend that it does not need to raise additional capital, dropped 5.3 percent yesterday. Morgan Stanley shares fell 8 percent.

JPMorgan’s original $2-a-share offer is 2 percent of Bear’s book value of about $84 a share at the end of the fourth quarter, Whitney said.

JPMorgan agreed to buy Bear yesterday after customers began pulling money out of the firm and it was forced to seek emergency financing or file for bankruptcy.

“If market participants begin to fear that another bank is facing a liquidity crisis, we could see another collapse,” said Morningstar analyst Ryan Lentell.

“Rumors of problems at Bear gained traction because of the bank’s exposure to the residential-mortgage market, which has been in turmoil,” he said.

“The investment banks all have exposure to these asset classes, and as fear over further price declines in any one asset class escalates, it could lead to a run on ano”