MTL - Reborn Capital Empire-v2 Chapter 721 Discussion on Merrill Lynch

Chapter 721 Discussion on Merrill Lynch

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"In another week, Unocal will be listed. As an underwriter, what price do you think the market will give?" Guo Shouyun asked.

Since Unocal completed PE financing in 2003, a large number of powerful investors have been added to the shareholder list. After six months of rapid development and six months of roadshows, it finally reached the juncture of listing.

After a brief consideration, Stephen replied: "In the context of the sharp rise in oil prices, Unocal's asset value has increased by 18.6% compared with last year, revenue has also doubled to US$36.6 billion; net profit has increased by 76.4% , reaching 3.88 billion US dollars. Among the top ten oil companies in the United States, Unocal has the highest total asset appreciation rate and return on equity.”

In 2003, Unocal received nearly $12 billion in financing from the Morgan Family Fund, Blackstone Group, Roosevelt Family Fund, The Carlyle Group, Goldman Sachs PE Investments, Kennedy Family Funds, Bush Family Funds, Merrill Lynch and Phoenix PE Investments.

The money has largely been spent on acquisitions of oil assets, especially the Permian Basin portfolio in Texas, where half of the $12 billion has been invested.

In 2003, Unocal's oil and gas reserves were only 4.37 billion barrels, ranking behind Exxon Mobil with 24.8 billion barrels, Chevron Texaco with 11 billion barrels, and ConocoPhillips with 7.63 billion barrels, with a total asset value of about US$66 billion. , and saddled with $18.3 billion in debt. And the vast majority of oil and gas reserves are located in Asia.

Now, after many mergers and acquisitions of various sizes, Unocal's assets have increased to US$93.6 billion on the basis of rising oil and gas prices, and oil and gas reserves have increased by 1.83 billion barrels, which not only narrowed the gap with ConocoPhillips, but also increased by 43.9 billion barrels. % of the oil and gas reserves are located in North America, and the company's asset structure is more balanced.

Of course, the debt has also increased from the previous $18.3 billion to the current $31.7 billion.

“…But Unocal’s main business is oil exploration and development, as well as financial investment. Compared with Exxon Mobil, Chevron, Texaco, Shell, etc., it involves upstream and downstream integration of oil exploration and development, petrochemicals, retail and energy. The company's ability to resist risks is undoubtedly much lower. Moreover, it has invested heavily in the ultra-deep water area of ​​the Sao Paulo Basin in Brazil for two years and achieved nothing, which will also become a place for investors to worry."

"...Fortunately, the rising oil price has now become a consensus recognized by the investment community. Coupled with the support of the much-watched investment institutions in the shareholder list, Unocal's IPO has also generated subscriptions that are nearly double the market average. If there is no accident If the company goes public, the stock price will hover around $65 billion to $70 billion!"

The average IPO subscription ratio of US companies over the past decade was around 18.4, while Unocal's IPO subscription ratio was 34.7. higher than the market average.

Guo Shouyun nodded, which was similar to what he expected.

"This time, the ordinary shares of Unocal held by Phoenix will not be cashed out, and if you are rich, you can buy some."

When Unocal raised the financing, Phoenix Bank bought 2.5% of Unocal's common stock.

Stephen Bryan knew Guo Shouyun's coveted oil resources in Iraq. After more than two years of layout, the Majinu oil field is like a ripe fruit, just waiting for the U.S. government to announce the start of picking. 12.6 billion barrels of Iraqi oil. The fourth largest oil field will triple Unocal's oil and gas reserves. Against the backdrop of rising oil and gas prices, Unocal's share price will undoubtedly skyrocket. Stephen Bryan, who knew this kind of insider information, certainly wouldn't sell Unocal.

"I'm afraid it's not that easy to buy!" Stephen laughed.

"why?"

“The allocation of Iraqi oil resources is no secret to the big guys like the Morgan family fund, the Blackstone Group, the Roosevelt family fund, the Carlyle Group, Goldman Sachs, the Kennedy family fund, the Bush family fund. Even if they don’t continue to buy, they will We will not cash out the shares in our hands. Moreover, the shares of Unocal’s financing this time are only 15% of the headquarters, or 150 million shares. With a 35 times oversubscription, we may not get much.”

Guo Shouyun did not expect that the reason why he let Phoenix increase its holdings of Unocal shares would be so understood by Stephen. However, he also admitted that Iraqi oil is indeed a huge boost to Unocal's share price. But he really let Stephen do it, more because of the Brazilian pre-salt oil.

Compared with the Iraqi oil, which is still in constant war and has huge reserves, but cannot be substantially realized. Brazil's pre-salt oil will undoubtedly be Unocal's largest gold mine.

In two years at most, this gold mine has truly blossomed into its brilliance. Against the backdrop of rising oil prices, Unocal has become the brightest star in the international oil market. However, there is definitely no way to tell Stephen in this situation.

"It's okay, just do your best!"

The latter nodded.

"Are you going to continue to wait for the Merrill Lynch acquisition?"

Guo Shouyun frowned slightly, "Has the situation of Merrill changed?"

"Merrill Lynch has acquired two mortgage companies in a row this October, and they are now approaching the Everest Group, a Hartford, Connecticut-based company that operates primarily in private clients with 230 $100 million in mortgage loans, and a $17.5 billion CDO option pool. In addition, I just got the news that O'Neal fired Jeff Kronthall, the head of Merrill Lynch's mortgage business unit, who was extremely capable of doing business. There are rumors that O'Neal had a big fight with Merrill Lynch's chief risk officer, Greg Fleming, at the weekly office meeting because the latter objected to Merrill's aggressive real estate mortgage business."

“…But considering the fact that since O’Neal replaced Dave Komansky as Merrill’s CEO in 2002, the company’s net profit has risen from $2.5 billion to $57 today, and Merrill’s board will likely support O’Neal instead of Ditch Greg. That means Merrill's exposure to real estate mortgages and their associated CDO bonds will continue to expand."

After a pause, Stephen Bryan frowned and said: "In addition, the risk of real estate in the United States is already very high. Before 2003, the CDO scale based on real estate mortgage bonds was only more than 50 billion US dollars, but only three in 2004. The size of the CDO increased by $153.7 billion in a quarter, which is insane. Also, banks and real estate mortgage lenders can make instant money as long as they continue to bring money to home buyers and then package the loans to investment banks. Huge profits."

"And investment banks sold these A-rated bonds to pension funds, mutual funds, and other investment institutions that didn't think there would be massive losses in U.S. real estate."

"This chain of interests is like a golden road paved with dollars, and everyone is making a lot of money. But the foundation of this pyramid is American home buyers. As banks and lending institutions continue to lower their qualifications for home buyers Censorship, people who can’t repay at all are also starting to buy houses, and people who can afford to mortgage their houses to buy more properties.”

"As the scale of real estate mortgage loans becomes larger and larger, the scale of CDOs becomes more and more amazing, and the risk of the entire real estate collapse will gradually increase!" After a pause, Stephen Bryan looked directly at Guo Shouyun with a solemn expression, "Boss , we used to predict that the final collapse of U.S. real estate will start in 2007, but looking at the development of the market now, I feel that it may implode in 2006. Merrill Lynch’s exposure to real estate mortgage loans and CDOs is becoming more and more Big. If the acquisition is successful, you need enough time to fire off these toxic assets.”

"As the world's largest broker, the size of the bonds held by Merrill Lynch will be staggering. O'Neal will also continue to pursue higher profits, consolidate his position, and eliminate the criticism of him from the outside world, especially conservatives within Merrill Lynch. Go deep in this spree that doesn't look like there's going to be any problems. Once the acquisition is successful, you don't necessarily have enough time to sell these assets before the market collapses."

"Did Merrill Lynch not hedge these assets?" Guo Shouyun asked after pondering for a moment.

"I did~www.novelbuddy.com~ But when the entire market collapses, the commercial insurance institutions in the United States may not be able to insure themselves!"

Hearing this, Guo Shouyun thought of AIG. The world's No. 1 insurance giant with a market value of US$180 billion and total assets of US$1 trillion, although it did not repeat the ending of Lehman Brothers. But it was also used by the U.S. government for surgery, with heavy losses!

"So, what's your opinion?"

"Sell Merrill's shares. Or talk to O'Neal in exchange for some of Merrill's assets. I think with his vigilance towards your boss, he will definitely be happy for you to withdraw from Merrill's board of directors."

Guo Shouyun nodded, "After working hard for so long, it would be really unwilling to give up like this."

"Then you'd better take down Merrill Lynch within half a year, otherwise, if you play again, the acquisition may not be worth it."

"Hmm! It seems that it's time to take the initiative." After a pause, Guo Shouyun turned his head, "When do you think we will sell the CDO in our hands?"

"The middle of next year!"

"It's too early." Guo Shouyun shook his head.

"The total value of the CDO bonds we hold has reached $95.34 billion. Such an amazing amount of money will take time to be realized." Stephen Bryan sighed, "I originally thought that if you hedge these CDOs, you can We will wait until the peak of the crisis, but looking at the current state of the U.S. real estate market, I am afraid that hedging is not enough to recover our losses when the crisis occurs. Therefore, it is better to exit early and keep the funds safe. Nearly 100 billion yuan Losing one-tenth of dollars in dollars would jeopardize our liquidity, and one-fifth would shake the foundations of the Phoenix. One-half would be enough to make us insolvent. … The risk is too great.”

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