Bear Stearns ESOP: Employees make significant loss

Not only the investors, but also the employees of the recently bursted Bear Stearns company are facing the heat of losses.

As I've explained in my previous article, Whether employee should opt for ESOPs?, the Bear Stearns employees have lost miserably on their stock holdings.

Employees owned almost 35% or one-third of Bear Stearns Stocks. With the collapse of the financial giant, these employee stock holdings have gone to zero value, making all their investments a 100% loss making venture.

An employee who acquired Bear Stearn's stock anytime from 2004 through 2007 stands to lose at least 97 percent of his investment if this deal closes.

Repeatedly, people keep taking about diversification. But they fail to diversify between their jobs and other sectors. Buying ESOP's or stocks of your own company is nothing but making a fool of yourself. If the company does well, you make fortune. But if it fails, you end making loosing entire money - your job is gone, so is your investment.

hence, be careful when buying stock options. They are not good from the diversification point of view.