March 14 (Bloomberg) -- Bear Stearns Cos. biggest investors, including Morgan Stanley and billionaire Joseph Lewis, raised their stakes in the fourth quarter, holdings that may be wiped out if the firm collapses.

Lewis, the second-largest shareholder of the New York-based securities firm, added 1.8 million shares to bring his holdings to 9.4 percent as of Dec. 31, according to data compiled by Bloomberg. Morgan Stanley, the third-biggest investor through mutual funds offered to clients, upped its position to 5.4 percent with the purchase of 4.7 million shares.

Bear plunged a record 47 percent today after the New York Federal Reserve and JPMorgan Chase & Co. stepped in to rescue the 85-year-old firm with emergency funding. The Fed is trying to prevent a demise of the second-biggest underwriter of U.S. mortgage bonds that might trigger further market declines.

``If they're really terribly impaired, and most of their capital is gone, then most of their business will be taken over by someone else,'' Richard Sylla, a professor of the history of financial institutions and markets at New York University's Stern School of Business, said in an interview. ``The stockholders will basically get nothing back.''

Bear fell $27 to $30 at 4:01 p.m. in New York Stock Exchange composite trading. It has lost 66 percent this year.

Bear's biggest shareholder, Dallas-based money manager Barrow Hanley Mewhinney & Strauss, acquired about 750,000 shares in the fourth quarter, leaving it with a 9.7 percent stake, the data show. Legg Mason Capital Management, run by Bill Miller, added 1.7 million shares and is the fifth-largest holder, according to the data.

Cayne Didn't Buy

James Cayne, former chief executive officer of Bear Stearns, is the fourth-largest holder of the shares with a 4.9 percent stake. He didn't change his holdings in the fourth quarter, Bloomberg data show.

Bear Stearns investors increased their positions as a 46 percent drop in 2007 made the shares the cheapest in three years. The top five Bear Stearns shareholders collectively own 40.4 million shares, or about one-third of the outstanding stock. The five shareholders saw the combined market value of their holdings decline by as much as $1.09 billion today.

Lewis, who started acquiring his Bear Stearns stake in September, was considering adding to his shares, a person close to him said on March 11. Lewis, the British-born, Bahamas-based investor, didn't immediately return a call seeking comment.

Miller declined to comment, Heather McDonald, a spokeswoman for Baltimore-based Legg Mason Inc., wrote in an e-mail.

James Wiggins, a spokesman for New York-based Morgan Stanley, declined to comment. James Barrow, president of Barrow Hanley, didn't return a call seeking comment.

To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.

Last Updated: March 14, 2008 16:27 EDT