By CNBC.com | 26 Sep 2007 | 03:54 PM ET
Bear Stearns is in serious talks with several outside investors, including Warren Buffett, about selling as much as 20 percent of the firm, according to a report in The New York Times online edition on Wednesday. Shares of the investment bank
[BSC 123.0 8.76 (+7.67%) were up almost 8% on the report. A Bear Stearns spokesman declined to comment to CNBC on a potential deal.
The Times reported on its Web site Wednesday afternoon that Bear Stearns was in "serious talks" with several outside investors, including Buffett, Bank of America, Wachovia and two Chinese companies: the Citic Group and China Construction Bank.
"I think it's absolutely necessary because Bear Stearns was in deep trouble," Richard Bove, an analyst at Punk Ziegel, told CNBC.
Bove upgraded Bear Stearns shares to "market perform" from "sell" on Wednesday.
"About six weeks ago, we made the argument that the company had to be taken over, and watching the stock price over the last few hours, the stock was supposed to be going down but was actually going up, so it was apparent that something was going on," Bove said.
Bear Stearns' $850 million Asset-Backed Securities Fund experienced declines in July, prompting some investors to seek redemption of their investments.
The investment bank, however, believes the assets in the fund -- tied to Alt-A and prime mortgages -- are worth more than what current market conditions will allow.
Bear Stearns saw the collapse of two hedge funds in July.