"Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment".
The investment included something a bit special: Merrill had to pay for the difference between the price paid by Temasek (USD48) in case any new stock was issued during 12 months after their original investment.
Not exactly the kind of clause that you are used to see for healthy companies. Or even not exactly the kind of clause you are used to see at all for any investment.
So now, Merrill has to pay for the price difference (probably about USD24 per share). Being generous, Temasek is going to reinvest the "fees" Merrill are going to pay.
Some other comments from the Bloomberg article are also interesting :
``Why these assets are written down when you're selling them and weren't written down in your earnings is a question,'' said Ralph Cole, a senior vice president in research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion and doesn't own Merrill shares. ``This kind of announcement is surprising and a little disheartening.''
This kind of comments could probably be shared with many other companies.
What is especially disheartening is that auditors aren't supposed to let this kind of things happen, as this is against IFRS accounting rules...
So, what can we trust, if financial statements aren't "fully realiable"...