After 38 Years Working For The Same Company, He Had Accumulated 5.6 Million Shares Of Stock. In Less Than 3 Months, Those Shares Fell 88%, From $88.35 To $10.82. The Story Of Jimmy Cayne Holds An Important Lesson For Every Investor
Jimmy Cayne spent nearly four decades building a fortune tied to one firm, and then watched it collapse faster than almost anyone on Wall Street thought possible. What his story reveals about concentration risk should unsettle every investor who feels…
He had been with the same firm for 38 years. Over that time he built up millions of shares of its stock, including the 5.61 million shares he later sold.
The stock opened 2008 at $88.35. He sold at $10.82. That was a fall of 88%, and it happened in less than three months.
The firm was Bear Stearns. The man was Jimmy Cayne.
From Stockbroker to Wall Street’s Richest Chief
Bear Stearns hired Cayne as a stockbroker in 1969. He became chief executive in 1993 and also took the chairmanship in 2001. In 2005, Forbes placed him No. 384 on its list of the 400 richest Americans and estimated his fortune at $900 million. Reporting at the time described him as the first Wall Street chief executive whose stake in his own firm was reportedly worth more than $1 billion. That claim was never independently verified.
A Record High in 2007, Then a Long Decline
Bear Stearns hit its all-time closing high of $171.51 on January 12, 2007. The stock declined over the following year.
How March 2008 Unfolded
- March 10, 2008: Shares closed at $62.30.
- March 14: The Federal Reserve extended an emergency loan, and shares closed at $30.
- March 16: JPMorgan Chase (NYSE:JPM | JPM Price Prediction) agreed to buy the firm for $2 a share, which put the value of the whole company at about $236 million.
- March 24: JPMorgan raised its offer to about $10 a share. Bear Stearns closed that day at $11.25.
Employees owned about a third of the company. CNN Money reported that they were angry their stakes would be “virtually wiped out.”
Cayne Sells at $10.82 a Share
In March 2008, Cayne sold 5.61 million shares at $10.82. CNN Money put the proceeds at just over $61 million. His partner sold another 45,669 shares. He sold after JPMorgan raised its offer, and his price was above that offer.
Using his holdings at the start of the year, CNN Money estimated his loss against the original $2 offer at $477.8 million.
24/7 Wall St. covered the sale in March 2008 in two pieces: Jimmy Cayne Unloads All Bear Stearns Stock and Bear Stearns (BSC): James Cayne Does Something Right For Once. Our view then was that selling was the right decision.
A Final Trade, Then a Quiet Exit
Bear Stearns shares traded for the last time on May 30, 2008, before the acquisition closed. Cayne died on December 28, 2021, at age 87.
A Lesson Every Shareholder Can Use
Cayne ran Bear Stearns and knew it better than any outside investor could. He still saw most of his money disappear in a single quarter. Deep knowledge of a company gives no protection against owning too much of it.
Contact [email protected] for any questions or corrections.
AJ spent 10 years writing about financial markets at The Motley Fool. His coverage centers on technology stocks and the broader macroeconomic trends, from interest rates to geopolitics, that shape where markets are headed next. AJ is drawn to the stories where big-picture economics and individual companies collide.