It looks like the sale of equity in Merrill Lynch (NYSE: MER) is not over, as losses at the firm are likely in Q4. According to The New York Post, "Merrill Lynch & Co. is in talks with Chinese and Middle Eastern sovereign wealth funds to raise capital by selling another 'big' stake in the company."
That is bad news for current Merrill shareholders, who just watched Singapore's Temasek Holdings put $4.4 billion into the broker. The value of Merrill's shares is off almost 50% this year to under $53. If the company has to raise another $10 billion, the dilution could take the stock below $40.
Shareholders in Merrill have to wonder why the company does not sell its piece of Blackrock (NYSE: BLK). The investment company has a market cap of $14 billion. Merrill owns about half of the company.
Merrill also has the option of breaking its brokerage and wealth management businesses off from its investment bank.
It is not clear that bringing in cash from outside the firm is the best answer for Merrill shareholders.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-04-2008 @ 10:55AM
BB said...
Who knows how much capital they need to stabilize, but selling BlackRock would be a painful pill and Bloomberg sale wouldn't give them enough if things are as bad as they seem. Take the foreign capital at a reasonable price and come back later for buybacks.