Merrill Lynch (MER) To Raise More Capital? Or Sell BlackRock Stake?

Press reports are saying that Merrill Lynch (MER) may have to raise more capital to offset huge Q4 losses. Merrill Lynch & Co. is in talks with Chinese and Middle Eastern sovereign-wealth funds to raise capital by selling another "big" stake in the company, Britain’s Observer reported. The US investment company has already taken in more than Singapore’s Temasek Holdings.

Merrill’s stock is down by almost half this year to $53. Another raise of capital could create dilution which would take the shares lower.

The company has another option, and it would be surprising if it is not on the table. Merrill owns about half of money manager Blackrock (BLK), a company with a market cap of over $14. Shares in BLK are trading at $219, near their 52-week high.

Time for Merrill to stop selling stock and unload one of its assets.

Douglas A. McIntyre