The recent purchase of Bear Stearns by JPMorgan Chase & Co. for a price of $2 per share will cause a “major negative revaluation” of financial stocks, according to Meredith Whitney, an analyst with Oppenheimer & Co.
As reported on Bloomberg.com, Whitney said, “Financial stocks have further downside of as much as 50 percent based upon 1990/1991 multiples of tangible book values. As we believe we will begin to see goodwill writedowns during the first half of this year, we believe investors will focus more on tangible book value and stocks will quickly revalue to far lower levels.”
As of 7 a.m. EST, Bear Stears was down 88 percent to $3.50. Lehman Brothers Holdings Inc. was down 17 percent to $32.50, JPMorgan was off 1.6 percent at $35.94, and Goldman Sachs Group Inc. was down 7.9 percent to $144.50.