Bear tries to clear the air

Rumors that Bear Stearns (BSC) is seeking a merger with a big bank failed to lift the stumbling broker’s shares Friday. The stock was down 40% at midday even as investors mulled over speculation that Bear might seek to sell itself to JPMorgan Chase (JPM), which on Friday agreed to finance the cash-crunched firm for the next month, or to an overseas investor such as U.K. titan HSBC (HBC) or China’s Citic. Bear has said a merger isn’t part of its strategy, but it seems clear now that the firm is in distress and may be forced to find a buyer.

JPMorgan and HSBC are among the big financial institutions that have appeared most robust in the wake of the subprime meltdown of the past year. Citic agreed in October to take a 6% stake in Bear Stearns, but the deal is now being renegotiated in light of the sharp declines in shares of both firms. Even if Bear is able to line up a deal, the company is looking at a steep discount to trading prices before this week’s liquidity problems nearly brought the firm down. Bear said it will hold a conference call at 12:30 p.m. Eastern time to discuss its situation. Investors will be hoping CEO Alan Schwartz makes a better showing than his predecessor Jimmy Cayne did back in August, when he inexplicably stepped away from a similar conference call without explanation - a sequence that didn’t exactly ease worries about leadership at the stricken firm.