Temasek Holdings, the Singapore-owned fund that became Merrill's biggest investor by acquiring shares in December, will buy $3.4 billion of the new stock, Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment. Merrill will also book $5.7 billion of writedowns in the third quarter.
The very first time when Temasek bought Merrill's shares, the price was US$48 per share. Currently, Merrill's share price is at US$24.33 per share! A 50% fall in share price will need a 100% gain in order to get it back to original buy price. If history repeats itself, there may be a financial hiccup every 10 years and this may make Merrill's share price to recover to US$48 per share even harder. This new deal makes me wonder if Temasek is seeing the red and thus decided to do a dollar-cost averaging.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoNJEp7BHg14
Discussion on the deal on OnlineCitizen
http://theonlinecitizen.com/2008/07/merrill-lynch/
Is Singapore Losing Its Investment Acumen?
http://hongjun.blogspot.com/2008/07/is-singapore-losing-its-investment.html
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