It is a sad, if familiar tale. A storied, blue chip company collapses and tales emerge of employees whose life savings have been wiped out. The same script is being replayed in the stunning collapse of Bear Stearns (BSC), where employees apparently owned a third of the company.
Bear’s employees would have had every reason to be confident in the investment bank – it has been around for 85 years, employed 14,000 people, sported a book value of $84 and 83 years of profitability. In a matter of days, the company agreed to a sell itself to JPMorgan for $2 per share, valuing the company at a mere $236 million. Its headquarters on Madison Avenue alone is valued at $1.2 billion.
Shell-shocked employees are now facing a double whammy: press reports (such as this report in the Wall Street Journal) indicate that some employees who had a significant portion of their savings in Bear stock are now wiped out and employees are wondering (according to this report in the New York Times) if they’ll keep their jobs or if they’ll get severance if they don’t. Another report on ABC News quotes James Stewart of Smart Money magazine:
These were secretaries. They don’t even live in Manhattan. They [are] commuting from New Jersey and Long Island and leading relatively modest lives and suddenly they’ve had major nest eggs wiped out.
It’s also surprising that it appears that bankers and brokers might be among those who lost their savings in Bear’s collapse. How is that people with a grounding in finances could take so much risk by investing a big portion of their assets in their employer’s stock? Bear’s collapse is yet again a reminder for the rest of us not to tie up too much of our savings in our employer’s stock.
