Вы находитесь на странице: 1из 4

Bear Stearn Case Issues: Culture: Bear is a company with the culture of taking risk and making risky

investment. Financial/ debt crisis: The company has a debt crisis which lead to it righting off $ 1.9 billion of bad loans. Varieties of Securities: Bear traded numerous securities and bonds ranging from Asset Management, Investment banking, investment advisory services, funds: Collateralized debt obligations (CDO),etc Collapse of Mortgages: One of the major cause of Bear problem was the lending with no documentation, NINJA loans (no income, no job or assets), on the assumption that house prices would rise, making background checks unnecessary, since the lender could always refinance against the value of the house, Competition: their competitors include Goldman Sachs, Lahman Brothers, Merrill Lynch, Morgan Stanley Volatile Industry: the Gross Leverage ratios of the industry shows that the industry is a volatile industry and returns are volatile. Potential Customer Loss: the company is in the middle of trying to persuade Corso with an investment of $800 million and the highest investor in the firm not feared or get scared or leave, trying to reassure him that everything is in order. Share repurchase to strengthen the firm Merger with China s CITIC Securities

Layoff: the firm resulted in laying off of some 300 employees in order to drive or reduce cost. Credit crisis and Financial Crisis High Mortgage Backed Securities: the company invested in mortgage backed securities and Subprime mortgages. Subprime market Collapse Changing Management Large amount owned to outsiders: the amount of debt obligation and borrowings (debt) which the company is liable to is larger than its equity, which in case of liquidation or bankruptcy, the creditors will be entitled to majority of the company. No evidence of dividend or tax payment.

Analysis: Using Financial analysis: High Interest Expense and Non Interest Eepense: most of the firms revenues are consumed by the large interest expense incurred by the firm. Drastic drop in Earnings Per Share: the EPS of the firm dropped from $11.42 in 2005 and $15.79 in 2006, to $1.68, which is as result of the drastic drop in the Net income applicable to common share from $2033 in 2006 to $202 in 2007.

Drop in Net Income: There was substantial in the revenue of the firm from $2054 in 2006 to $233 in 2007. Volatile Interest rate movement Wrong Information from Cayne: another factor that affected the shares and the operations of Bear was the conference held by Cayne claiming the firm did not have large exposures to mortgage-backed securities, but in contrast they have nearly $50 billion in mortgage-related securities which lead and spurred investors fear instead of reassuring them, and driving their share price down. Drop in their Rating: the Standard and poor lowered the firms long term senior debt rating from A+ to A. Problems with CDS (Credit default swaps)

Recommendation/ Conclusion: Reduction And Divestment: Bear needs to reduce some of its highly risky securities and reduce its investment in CDS bonds

Merger: the company needs to merge with a stronger financial company to help share some of its debt obligations.