Investors Growl at Bear's Sale Price

Bear Stearns ( BSC) shareholders are up in arms over the $2-a-share price tag the firm is fetching in its federally funded bailout by JPMorgan Chase ( JPM).

Expectations are that a raft of lawsuits will be filed by angry shareholders, employees and other market participants, who are witnessing a $236 million buyout deal that values the 85-year-old firm's shares at a 90% discount to its closing price on Friday. The offer includes a $30 billion financing package by the Federal Reserve.

Billionaire investor Joe Lewis, a large Bear shareholder who has plowed money into the New York-based investment bank amid its trouble the past few months, referred to JPMorgan's buyout offer as "derisory" to CNBC on Monday. Lewis could look to lose about $1 billion in Bear Stearns since investing in the company over the past several months for prices as high as $177 a share in January.

Already, an investor group known Eastside Holding, has filed a complaint today in Manhattan federal court alleging that Bear misrepresented to investors its financial condition, according to Bloomberg. The complaint was filed by San Diego-based law firm Coughlin Stoia Geller Rudman & Robbins and represents shareholders who have acquired the firms stock from Dec. 14, 2006, through March 14, 2008.

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Hashed out over the weekend, Bear Stearns' deal hurts the most for its 14,000 employees who have been paid bonuses via options. About one-third of Bear Stearns is employee owned -- a fact that had been a source of pride for former CEOs Jimmy Cayne and Alan "Ace" Greenberg. According to CNBC, half Bear's employees may be handed pink slips should the deal be consummated, which is expected in June.

Now that pride must be turning into angst and anger for some of the rank-and-file, as well as senior management.

Cayne, Greenberg and current CEO Alan Schwartz also have a significant chunk of their net worth tied up in Bear.

At this point, investors are fundamentally trying to get their arms around the sudden and stunning capitulation by Bear, which had made adamant public declarations of its health. On Wednesday, Schwartz appeared on CNBC in a failed attempt to placate a jittery Wall Street, which had seen Bear's shares getting crushed by rumors of illiquidity.

Sources tell TheStreet.com that Bear employees are distressed by the buyout news and that counselors have been made available for staffers to discuss the uncertainty surrounding the firm and their jobs. Employees are expected to continue working, although managers say that it's very difficult to keep people focused, the sources say.

During a conference call following the buyout announcement held by JPMorgan, executives tried to emphasize that Bear is still open for business despite the unsettled news.

Schwartz's comments on Wednesday were followed, stunningly, by Friday's news of a bailout. JPMorgan offered to provide a backstop credit facility funded through the Fed's discount window -- the lender of last resort -- for the troubled investment bank, as clients withdrew money from it at a rapid clip. The move at the time seemed like the prelude to a kiss, but no one could have imagined that a weekend-long round of negotiations involving the Fed would result in a sale of the company to JPMorgan for a song.

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