Just how big a disaster was Chartered Semi for Merrill?

With the failure of the Chartered Semiconductor rights issue, Merrill Lynch has accidentally diversified into the semiconductor industry. How much of a disaster is this for Merrill?

Investment banking, asset management and now semiconductors. Merrill Lynch's failed rights issue for Chartered Semiconductor, has seen it add a new business line.

Around 393 million shares in Chartered Semi were unsubscribed in its rights issue, and the company declared this meant the underwriter was left with a 15.7% stake.

Merrill Lynch hard underwrote the offering at S$1 a share and so has paid S$393 million for the stock. It has since traded down to S$0.86 meaning the value of the stock is now S$337.98 million. That is a loss of S$55 million, or $30.7 million รป if marked to market in US dollars.

Additionally the firm's internal accounting will impose a capital charge on...

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