JP Morgan Buys Bear Stearns For Pennies On The Dollar; What's It Mean For Tech?
from the bubble-bursting-or-economic-collapse? dept
While not strictly a technology story, JPMorgan's buyout of Bear Stearns on Sunday is worth looking at in the larger context of the tech industry. As you hopefully know by now, JPMorgan picked up Bear Stearns for $2/share, a total of $236 million, which is (quite literally) pennies on the dollar for a firm that not so long ago was valued at $170/share and on Friday alone had tumbled from about $55/share to $30/share. On Friday, of course, the Fed stepped in to keep Bear Stearns alive (through JPMorgan) and the weekend was spent trying to figure out options before the Asian markets could open late Sunday night (US time). There will be plenty of Monday-morning quarterbacking on this deal (so it's fitting that it all played out on a Sunday), but the discussions about the impact on the tech world has been mixed if anything. It would be great to get the perspective of some readers on how this is likely to play out for tech companies (both big and small). While many may be somewhat isolated from a meltdown on Wall Street, there certainly are some important indirect connections. From what I've seen, it doesn't seem like there will be much short-term impact, but the longer-term issues could be worth watching out for.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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Filed Under: bailouts, failures, financial services, panic, wall street
Companies: bear stearns, jp morgan
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Lesson for Tech People:
Start focusing on solving real problems (not just finding a new flavor of advertising, fixing the music industry, or some lame office productivity app).
The Street is only one area where opacity, moral hazard, and other industrial-age hallmarks of unsustainable capitalism continue to fester...
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Re: Lesson for Tech People:
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I wonder about Lehman.
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Impact on Techs
- Good: Credit is a whole heap harder to get. There are an army of IT workers out there who are currently 'between jobs' as a result of either some cowboy buying their parent company on a leveraged deal (i.e. a loan) and extracting the value by outsourcing/offshoring/downsizing 'non-core' activity - OR from the existing board doing precisley that to themselves before someone else comes in and does it to them. Only sovereign wealth funds will be able to play that game now (and there are fewer of them) so people will be able to make strategic investments that play over the longer term again without obsessing about quarter to quarter margins. Heck, they may even be willing to invest in their 'own' IT guys again rather than seeing them as an outrageous luxury.
Bad:
- If you're an entreupreneur looking at a Tec start-up your potential funding just got much, much harder.
- (superbad!) If the company you work for has a large amount of debt the options for refinancing that debt just got far harder. This could precipitate a bloodbath in the economy as finance directors run out of options to keep cashflow alive. Bottom line - many companies (big and little) are going to go under and take the IT guys with them. As a natural pessimist I fear that this will far outweigh any benefit from the good point above.!
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Re: Impact on Techs
Besides, there's already too much money in SV and not enough good ideas.
Chris.
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Re: Impact on Techs
This is the one that I'm trying to understand, because I don't see the direct impact. Most VCs have plenty of funds raised and committed from GPs, and those GPs tend to be things like pension funds and university endowments. The direct link to i-banks seems minimal. So why is it going to be that much more difficult to get funding?
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Re: Re: Impact on Techs
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$$$
As for the impact on tech stocks, I don't really see one. We have seen this many times before (especially in tech), there is a crisis, people get scared and sell things very cheaply.
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Mindset
"No sir," replied Morgan. "The first thing is character."
"Before money or property?"
"Before money or anything else. Money cannot buy it...Because a man I do not trust could not get money from me on all the bonds in Christendom."
"Remember, my son, that any man who is a bear on the future of this country will go broke."
- John Pierpont Morgan
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Canary in the Coal Mine
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Watch banks carefully.
- I'm thinking a nice pad of cash in the mattress. Inflation will be a problem, but, cash won't be eaten up by banking exec's. keeping their high lifestyle going (through banking fees).
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Re: Watch banks carefully.
I recently watched a fellow in line in front of me have exactly that happen, they told him he had like $50 coming from his pay check, the rest was going overdrafts and fees. A $0.01 overdraft = ~ $25 in fees, it adds up when you are using your debit card for a pack of gum, & a coke.
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Re: Re: Watch banks carefully.
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Bear Stearns and Tech
In the tech world, the current debate over net neutrality is similar from the "regulation" perspective. Companies such as Comcast and AT&T say "don't regulate us". The free market will "guarantee" that the ISPs will not "interfere" with internet packets. Well Comcast has already been "caught" "shaping" packet flows. As these corporate "mistakes" become exposed and accumulate, the natural "knee jerk" reaction will be to impose corrective regulation.
Like the financial institutions hiding the true value of the collateralized debt from the public, the tech industry is hiding the real implications of how the unregulated net neutrality will be managed by them. It has taken nearly five years for the growing credit bubble to burst. Now that it has, regulatory legislation will soon follow.
In terms of the tech world (net neutrality) it is probably too soon for the "bubble" to figuratively explode. When it does, regulation will soon follow.
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Many consequences for the tech industry
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I truly hope all American Citizens noticed this problem back when in started and began picking up gold/silver when they could...it may be the only thing to get you through when the next Depression hits (which will be as soon as the other global economies finish cutting the ties to Wall Street so they can stop propping them up).
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Dollar is undergoing a deevalution
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Re: Dollar is undergoing a deevalution
This is already the reason cited for BMW's expansion in the US.
http://www.cnn.com/2008/BUSINESS/03/10/bmw.jobs.ap/index.html
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Bear Stearns
This leaves startups not just looking for money, but trying to gain attention to their products/services as well as the threat of their banks locking money so that they can not pay bills or payroll.
It is a very interesting situation, the more money gets locked, including VC/Angel money, the harder time startups are going to have.
The positive side of this, social networking is going to boom if a pile of unemployed people start using facebook and linked in to help them find jobs. Talk about getting support from your friends.
My 2 cents.
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On the other hand, some customers of mine are Hedge Funds that largely do better the higher the volatility. Times might be good for these folks.
Some uses of my product involve better, more real-time position-keeping, meaning a company is less likely to get into this sort of mess. It's all hindsight but sometimes peoples' ears perk up a bit more at things like that in times like these.
And lastly, there's argument that a product like mine, that helps you do more work with less man-hours, can help people deal with a reduced work-force keep up the same output.
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Time to focus on the fundamentals
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jp morgan buys bear stearns...
Of course, the real "war" is for our minds, -to control the impulses and beliefs of the zeitgeist, which has the analogous breadth of the floating cursor on a computer display... our critical consciousness ought to compare at least to the active window running a program, but our sense of progression and process through currents of history has been atrophied and skewed.... Marshall McLuhan is still required reading, global villiagers! Be you semioticly savant, technocratic-peasant, or global-villiage idiot; if you are reading this, you should study the insights of sage McLuhan, kidz!
((-keep diggin' in th' dirt, plant a few flowers where ya can, eh?-)) -Unk S
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Have nice day, ya hear?
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