Bear Stearns Conference Call Worries Investors

During a conference call on Friday, March 14, executives from Bear Stearns (NYSE:BSC) revealed that they have been and will continue to speak with their investment bankers, Lazard Ltd about “alternatives,” known on Wall Street as a euphemism for putting part of or all of a company up for sale.

Observers say that the Bear Stearns Companies Inc will soon give in to market pressure.  Meredith Whitney, an Oppenheimer analyst, noted on Friday, “A company is only as solvent as the perception of its solvency…When a company that is leveraged over 30 to 1 faces a crisis of liquidity and confidence of creditworthiness, that company will be unable to leverage its collateral and its leverage will be forced down 1 to 1.”

According the Market Watch, “Investors are voting with their brokerage accounts, pushing down shares of Bear at last check down $21.75, or 39%, at $35.25 on volume of more than 146 million shares.”  In response, Whitney states, “BSC's equity could become worthless as forced sales create asset deflation, which could cause cannibalization of remaining capital."

Analysts say that the fall of the brokerage firm will be a long, drawn out process while others think that there is still hope.  Punk Ziegel analyst Dick Bove told Market Watch, "I think it's pretty clear that they will survive, but survive at half their current size."

According to the Associated Press, an unnamed source has said that the company will most likely be bought by J.P. Morgan, although Bear Stearns and J.P. Morgan have yet to comment.