December 25, 2007 (LPAC)--The latest lunacy of sovereign funds purportedly bailing out already drowned banks and investment firms, was puffed with Monday's sale by Merrill Lynch, the nation's largest brokerage, of a $5 billion stake to Temasek Holdings, a sovereign fund run by the Singapore Finance Ministry. As the New York Times notes, Merrill is getting smashed with mortgage-related losses, and is expected to "write down its mortgage investments by an additional $8 billion or more in the fourth quarter." So on Monday it not only sold stock at a "discount" to Temasek to get $5 billion in cash, but also agreed to sell an additional $1.2 billion in discounted stock to Davis Selected Advisers, and likewise signed a deal to sell most of its commercial finance business to the General Electric Company, to raise an additional $1.3 billion. Grand total: $7.5 billion.
Wall Street reacted to the news in its typically psychotic fashion: stocks overall rose because the announcements "raised hopes that wealthy foreign investors would come to the rescue of America's ailing investment firms," while Merrill's own stocks fell.
Other recent sovereign fund mega-deals include:
- UBS: got $11.5 billion on Dec. 10 from the Government of Singapore, and an unnamed Middle East investor.
- Citigroup: got $7.5 billion on Nov. 26 from the Abu Dhabi Investment Authority.
- Morgan Stanley: got $5.0 billion on Dec. 19 from the China Investment Corporation.
- Bear Stearns: got $1.0 billion on Oct. 22 from Citic Securities.
