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Tuesday, July 29, 2008

Temasek Holdings to Dump Additional US$3.4 Billion For Merrill Lynch Stock

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.

Discussion on the deal on OnlineCitizen

Is Singapore Losing Its Investment Acumen?

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