Chapter 721: A Discussion of Merrill Lynch

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"In another week, Unocal will go public, as an underwriter, what kind of price do you think the market will give?" asked Guo Shouyun.

Since 2003, Unocal has completed PE financing, adding a large number of strong investors to the list of shareholders. After half a year of rapid development and a half-year roadshow, it finally reached the threshold of listing.

After a brief consideration, Stephen replied: "Against the backdrop of a sharp rise in oil prices, Unocal's asset value has increased by 18.6% compared to last year, revenue has doubled to $36.6 billion, and net profit has increased by 76.4% to $3.88 billion. Among the top 10 oil companies in the United States, Unocal has the highest total asset appreciation rate and return on net assets. ”

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

Most of that money was spent on the acquisition of oil assets, especially the Permian Basin portfolio in Texas, where half of the $12 billion was invested.

In 2003, Unocal had only 4.37 billion barrels of oil and gas reserves, behind ExxonMobil (24.8 billion barrels), Chevron Texaco (11 billion barrels) and ConocoPhillips (7.63 billion barrels), with total assets worth about $66 billion and liabilities of $18.3 billion. And the vast majority of oil and gas reserves are located in Asia.

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

Of course, liabilities have also increased from $18.3 billion to $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 and other upstream and downstream integrated companies involved in oil exploration and development, petrochemicals, retail and energy, the ability to resist risks is undoubtedly much lower. Moreover, investing heavily in the ultra-deep waters of Brazil's São Paulo Basin for two years without getting anything will also be a source of concern for investors. ”

“… Fortunately, the rising oil prices have become a consensus in the investment community, and with the support of those high-profile investment institutions in the shareholder list, Unocal's IPO has also generated nearly double the subscription of the market average. If there are no accidents, the company's stock price will hover around $650~$70 billion after listing!"

Over the past decade, the average IPO subscription ratio of U.S. companies has been around 18.4, while Unocal's IPO subscription ratio is 34.7. Above the market average.

Guo Shouyun nodded, which was about the same as he expected.

"This time, don't cash out the Unocal ordinary shares held by Phoenix first, and if you have rich funds, you can buy some. ”

When Unocal raised the capital, Phoenix bought 2.5% of Unocal common stock.

Stephen Bryan knows that Guo Shouyun covets Iraq's oil resources, after more than two years of layout, the Majinu oil field is like a ripe fruit, just waiting for the US government to announce the start of picking, 12.6 billion barrels of Iraq's fourth largest oil field, will triple Unocal's oil and gas reserves, in the context of rising oil and gas prices, Unocal's stock price will undoubtedly soar. Stephen Bryan, who knows this inside information, is certainly not going to sell Unocal's shares.

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

"Why?"

"The allocation of Iraq's oil resources is not a secret to the Morgan Family Funds, the Blackstone Group, the Roosevelt Family Foundation, the Carlyle Group, Goldman Sachs, the Kennedy Family Funds, and the Bush Family Funds. Even if they don't continue to buy, they won't cash out their shares. Moreover, the shares of Unocal financing this time are only 15% of the headquarters capital, that is, 150 million shares. With 35 times oversubscribed, we may not get much. ”

Guo Shouyun didn't expect that the reason why he asked Phoenix to increase his holdings of Unocal shares would be so understood by Stephen. However, he also acknowledged that Iraq's oil was indeed a huge boost to Unocal's share price. But he really got Stephen to do it more because of Brazil's salt oil.

Compared to Iraqi oil, which is still in constant war and has huge reserves, but there is no way to liquidate it significantly. Brazilian pre-salt oil will undoubtedly be Unocal's largest gold mine.

In two years at most, this gold mine will truly bloom its brilliant light, making Unocal the brightest star in the international oil market against the backdrop of high oil prices. But there must be no way to tell Stephen about this situation.

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

The latter nodded.

"Are you prepared to wait any longer for Merrill Lynch's acquisition?"

Guo Shouyun frowned slightly, "Merrill Lynch's situation has changed?"

In October, Merrill Lynch acquired two mortgage companies in a row, and they are now approaching Alphast Group, a Hartford, Connecticut-based company with a private client business with $23 billion in mortgage loans and a $17.5 billion CDO option pool. In addition, O'Neill has just received news that Jeff Cronsor, the head of Merrill Lynch's home mortgage business department, is extremely capable of business. There are also rumors that O'Neill and Merrill Lynch's chief risk officer, Greg Fleming, had a big fight at the weekly office meeting. Because the latter objected to Merrill Lynch's aggressiveness in the real estate mortgage business. ”

“… However, considering the fact that the company's net profit has risen from $2.5 billion to the current $57 since O'Neal replaced Dave Komansky as Merrill Lynch's CEO in 2002, Merrill Lynch's board of directors will most likely support O'Neill and abandon Greg. This means that Merrill Lynch's exposure to real estate mortgages and the CDO bonds associated with them 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 now. Before 2003, the size of CDOs based on mortgaged real estate bonds was just over $50 billion, but in just three quarters of 2004, the size of CDOs increased by $153.7 billion, which is insane. Moreover, banks and real estate mortgage lenders can make huge profits immediately as long as they keep bringing money to homebuyers and then package the loans and sell them to investment banks. ”

Investment banks have sold these A-rated bonds to pension funds, mutual funds, and other investment institutions that believe that the U.S. real estate industry will not suffer massive losses. ”

"This chain of interests is like a golden road paved by the dollar, and everyone is making a lot of money. But the foundation of this pyramid is home buyers in the United States. As banks and lenders continue to lower the qualifications of home buyers, those who simply cannot repay are also starting to buy houses, and those who can afford to repay are mortgaging their houses to buy more properties. ”

"As the scale of real estate mortgages grows larger and the scale of CDOs becomes more and more amazing, the risk of the collapse of the entire real estate will gradually magnify!" After a pause, Stephen Bryan looked directly at Guo Shouyun with a solemn expression, "BOSS, we once predicted that the final collapse of American real estate would start in 2007, but looking at the current development of the market, I feel that there is a possibility of implosion in 2006." And Merrill Lynch has a growing exposure to real estate mortgages and CDOs. If the acquisition is successful, you'll need enough time to fire off these toxic assets. ”

"As the world's largest broker, Merrill Lynch's bond holdings will be staggering. O'Neill will also continue to deepen in this carnival that does not seem to have any problems in order to chase higher profits, consolidate his position, and eliminate the criticism of the outside world, especially the conservatives within Merrill Lynch. By the time the acquisition is successful, you may not have enough time to fire off these assets before the market crashes. ”

"Didn't Merrill Lynch hedge these assets?" asked Guo Shouyun after a moment of silence.

"Yes. However, when the whole market collapses, the commercial insurance institutions in the United States may not be able to protect themselves!"

Hearing this, Guo Shouyun remembered AIG. The world's No. 1 insurance giant with a market capitalization of $180 billion and trillions of dollars in total assets, although it did not repeat the ending of Lehman Brothers. But it was also used by the U.S. government to open the knife, and the losses were heavy!

"So, what about your opinion?"

"Sell Merrill Lynch's shares. Or talk to O'Neill in exchange for some of Merrill Lynch's assets. I think with his wariness of you, the boss, he would certainly be happy for you to voluntarily quit Merrill Lynch's board of directors. ”

Guo Shouyun nodded, "I've worked hard for so long, if I just give up, I'm really unwilling." ”

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

"Hmm... It seems that it is 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 a bit too early. Guo Shouyun shook his head.

"The total value of our CDO bond holdings is $95.34 billion. Such an astonishing sum of money takes time to realize. Stephen Bryan sighed, "I originally thought that if we hedged these CDOs, we could wait until the peak of the crisis before making a move, but looking at the current situation in the US real estate market, I'm afraid hedging is not enough to recover our losses when the crisis occurs." Therefore, it is better to withdraw early and put the funds in your pocket. Nearly 100 billion dollars, if we lose a tenth, it will jeopardize our liquidity, and a fifth will shake the foundation of Phoenix. One-half, that's enough to make us insolvent. … The risk is too great. ”