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LATEST FORECASTS & ANALYSIS ON LEH, BAC & MER (Sept. 12, 2008)
It was interesting that on Friday night, Sept. 12, 2008,
the price forecasts for LEH dramatically changed from
modestly positive to significantly negative
FORECASTS ON TICKER SYMBOL: LEH
SYMBOL, DATE, PRICE, FORECAST, PERCENT
LEH, 20080912, 3.7100, -1.0188, -27.5
LEH, 20080911, 3.6300, 3.0948, 85.3
Whereas MER forecast remained positive, and BAC had
turned from positive to negative in price forecast.
FORECASTS ON TICKER SYMBOL: BAC
SYMBOL, DATE, PRICE, FORECAST, PERCENT
BAC, 20080912, 33.6500, -0.6653, -2.0
BAC, 20080911, 33.0600, 1.5572, 4.7
So it appears that the weekend emergency meeting was
in essence a ritual, the decision apparently had already
been made on or before Friday, Sept. 12, 1008, to some
extent at least, to drop or abandon LEH, but then to work
out a rescue plan to save MER instead.
At least the above Friday (20080912, Sept. 12, 2008)
price forecasts hinted or suggested so.
It is also very interesting that BAC is buying MER for
$29 when the fair market value (FMV) for MER is just
$19, according to the latest price forecast for MER..
So BAC is paying a hefty $10/share extra above MER's
FMV for MER. Since the buyout is said to be worth
US$50 billion, it works out to a rich, excess premium of
well over US$17 billion, to MER's benefit.
That's a lot of rich premium to pay, that extra $17 billion.
MER got really lucky, in view of the above price analysis
and calculations, and BAC, or rather BAC's shareholders,
may well suffer in coming days for the bank's apparent
extravagance or profligacy in paying such a munificent
US$17 billion premium for MER.
We shall soon see if BAC stock price reflects that soon.
One can only speculate whether BAC management had
voluntarily entered into the $50 billion buyout for MER,
since it apparently contains an extremely rich and hefty
premium, especially given the bearish and risky outlook
for the bank sector.
The coming days should be very interesting.
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