Prof. Gordon Smith comments here on the "fire sale"(?) at $2 per share of Bear Stearns on Sunday night to JP Morgan, with apparent pressure from the U.S. Treasury Department and the Federal Reserve Bank [despite statements days earlier that the value of the stock was much, much higher], and the application to the situation of Delaware corporate law. For example, did the Bear Stearns board of directors meet their Revlon duties to get the highest price? Also, if they were insolvent, did the directors fulfill their duties to creditors (some observers said that the only other option was bankruptcy). The good professor cites to a Delaware Chancery Court case that applied the Business Judgment Rule to an apparently similar situation where a board was forced to choose between bankruptcy or another unpalatable option. See Odyssey Partners, L.P. v. Fleming Companies, Inc., 735 A.2d 386 (Del. Ch. 1999).
Prof. Larry Ribstein also comments on the situation here, citing to his prior writings on the issues.
Kevin LaCroix comments here on the inevitable lawsuits that have already been filed v. Bear Stearns.
UPDATE: In light of the recent increase in the price of Bear Stearns’ stock and JP Morgan’s stock, Prof. Smith updates his analysis here, with reference to the Delaware decisions in both Quickturn and Omnicare, wondering aloud how, if at all, the Fed’s pressure and involvement to get the deal done would impact the legal analysis by a Delaware court of the applicable fiduciary duties of the Bear Stearns’ board.
UPDATE II: Here is another update from Prof. Gordon Smith, including a link to his interview by the WSJ Law Blog (the comments to which are in parts entertaining and educational.)
UPDATE III: Here is an update on NYT’s Dealbook blog that indicates a possible drafting error in the agreement by JP Morgan’s lawyers, regarding JP Morgan’s duty to guarantee Bear Stearn’s liabilities forever, and that might be one reason JP Morgan quintupled its offer to $10 per share (which in part will allow them to correct this term in the agreement, as well as "save" the deal in light of pending shareholder suits and recent threats by some to force a bankruptcy.) Prof. Smith has more on the guarantee issue here.