Wall Street expects Bear Stearns to fetch a higher price than the $236 million (£116 million) takeover it agreed with JPMorgan over the weekend, prompting shares in the ailing US securities firm to soar yesterday.

JPMorgan agreed to buy Bear Stearns for $2 a share, a tiny fraction of the $80 it was trading at this month, after Bear was unable to meet a surge in margin calls by investors who were worried about its ability to weather the credit crunch.

However, Bear Stearns shares jumped by 23 per cent to $5.91 yesterday, as investors bet that JPMorgan would be forced to raise its offer, which is subject to a shareholder vote.

Nancy Havens, president and founder of Havens Advisors, a hedge fund that invests in takeover targets, said: “It’s perfectly possible that the deal you see right now is not the deal you’re going to get. There’s every incentive for the shareholders to vote no the first time.”

Investor optimism that JPMorgan may be forced to pay a higher price for Bear Stearns came as it emerged that the Securities and Exchange Commission was investigating whether hedge funds and other traders sought to profit from Bear Stearns' woes by trying to force its share price down.

The US watchdog is probing whether traders spread false information last week about Bear Stearns' finances, as rumours about its dire financial situation fuelled creditor nerves, prompting an effective run on the bank which ended in its fire sale to JPMorgan.

Traders bet against ailing companies such as Bear Stearns through so-called short trades, in which they effectively sell borrowed shares and aim to buy them back at a lower price before returning them to the lender.

Separately, Citic Securities, the largest Chinese brokerage, has pulled out of a deal to buy 6 per cent of Bear Stearns for $1 billion in the wake of the agreement with JPMorgan.

The Chinese brokerage, which was already pushing for a bigger stake for its money following a dive in Bear Stearns share price after the original agreement in November, scrapped the deal altogether yesterday. A Citic spokesman said: “The preconditions and basis for the strategic cooperation agreement announced on November 2 do not exist any more after the JPMorgan acquisition.”

“As a result, the company has decided to terminate cooperation plans with Bear Stearns. Since the company has never signed any formal agreement with Bear Stearns and has never paid any money to Bear Stearns, the company will not bear any losses or investment risk from the termination of the originally planned deal.” Citic’s decision comes less than two weeks after it began renegotiating its original deal with Bear Stearns, pushing for an 8 per cent stake in the firm. It argued that it deserved a bigger stake because its shares had fallen by 35 per cent since the original agreement.

Speculation continued yesterday about which firm would be the next to be forced into a fire sale. Douglas Sipkin, a Wachovia analyst, named Merrill Lynch as “the riskiest” of the American investment banks.

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