Merrill Management: Disregard Everything We Say

While they didn't come right out and say it last night, the message coming out of Merrill Lynch's management (MER) is clear: Disregard everything we say.  Below we highlight some of the comments that MER's CEO has made in 2008 regarding the company and its capital position.  In January, the company was "well positioned," and then in April the company still had "plenty of capital" for the "foreseeable future."  But by the end of April, the company went to the markets and raised $9.5 bln in capital.  After raising the $9.5 bln the company said, "We have no intention of raising any more capital."  So instead they sold their stake in Bloomberg and tried to sell Blackrock before the ratings agencies put the kibosh on that.

Less than two weeks ago, the CEO of MER said that in response to low ball offers for their fixed income assets, the company didn't "want to do dumb things...We have not liquidated stuff at any prices we could get."  Then last night the company comes out and sells $30 billion of its CDO portfolio for 22 cents on the dollar.  We can only imagine what the low ball offers were.

Since MER management has repeatedly gone back on its word through the course of 2008, last night's capital raise announcement was accompanied by a statement that management would buy 750K shares of stock.  While these actions are meant to sound like a vote of confidence in the stock, let's just remember that in today's prices, 750K shares of stock works out to about $18 million.  To put that in perspective, the company paid its top four current executives over $50 million in salary and bonuses for what they 'accomplished' in 2007.

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Comments

[Danny]

Could you do the same exercise for UBS?