INSTANT VIEW: Merrill to sell shares

NEW YORK (Reuters) - Merrill Lynch & Co MER.N said it expects to take a $5.7 billion pretax write-down in the third quarter due to losses on its sale of mortgage assets and plans to raise at least $8.5 billion by selling common shares.

Merrill, which has already taken billions of dollars of writedowns and sold key holdings including a 20-percent stake in Bloomberg when it announced its second-quarter earnings, said on Monday Singapore's Temasek Holdings would buy $3.4 billion of the offering.

The following are market comments on the firm's announcement:

COMMENTS

WILLIAM LEFKOWITZ, OPTIONS STRATEGIST AT BROKERAGE FIRM

VFINANCE INVESTMENTS IN NEW YORK

"Investors were hopeful that the financial companies that were taking these major write downs were not going to issue common stock to raise capital.

"With the issuance of stock from Merrill Lynch, that could lead to more selloffs in the financial area. The puts in several of the financials were active today including Merrill."

FREDERIC RUFFY, OPTIONS STRATEGIST AT WEB INFORMATION SITE

WHATSTRADING.COM

"Taken together, the news is a reminder that the problems facing Merrill are far from over. It is facing more write downs and needs more capital. The overall affect on third-quarter earnings and beyond is not good.

"In addition, uncertainty still remains. While today's news will clearly enhance Merrill's capital position, the longer-term outlook for future earnings is still difficult to quantify.

"For that reason, shares have been trading lower and we have seen a lot of interest in Merrill puts over the past few trading sessions. Implied volatility is high, which is generally the case during periods of extreme uncertainty and investor anxiety."

KIM RUPERT, MANAGING DIRECTOR OF GLOBAL FIXED INCOME

ANALYSIS, ACTION ECONOMICS, SAN FRANCISCO

"It might be able to soothe some fears. Even the fact that they found some buyers is decent and they're able to raise capital.

"I suspect after the rally we had in Treasuries today you will probably see some profit-taking tomorrow, and maybe even a rebound in equities."

WILLIAM SMITH, PRESIDENT OF SMITH ASSET MANAGEMENT INC

"What they're doing is putting in a price on a very, very large lot of bonds. It's most of the subprime garbage so it's been written down for the most part, and it's going to continue to be written down.

"The problem here is with (Merrill Chief Executive John) Thain. You can throw him into the credibility-problem camp now.

"You can only say we're not going to do a certain type of write-down, or we're not going to do a certain type of equity offering. You can only do that so many times.

"This price is horrendous.

"It's tough to call the bottoms on these things because it seems like it's never ending, but this could be viewed as the watershed."

JAMES ELLMAN, PRESIDENT, SEACLIFF CAPITAL, SAN FRANCISCO,

OWNS MERRILL SHARES

"They did at least $7 billion of asset sales, now they need another $8.5 billion. Why do they need that much more? Do they have that many more writedowns? Are they going on an acquisition spree? Are things that much worse than we were led to believe?

"If people were going to believe Thain when he said Merrill raised more capital than it needed to and had taken conservative marks on its securities book, I'm not sure they're going to believe him tomorrow morning. He had an incentive to take as large write downs as possible to clean up this mess and blame it on the old management team.

"Now people are wondering why they didn't sell assets when prices were higher, why they didn't (they) hedge them more earlier, and why he didn't raise capital when the stock price was higher than it was now."

RICHARD SICHEL, CHIEF INVESTMENT OFFICER, PHILADELPHIA

TRUST CO., PHILADELPHIA

"On the one hand it shows progress with the write down and cleaning off the books, but on the other hand there is the stock issuance, and I wonder how current shareholders will feel about that.

"And is that the end of the story? It does show Thain is very willing to make difficult decisions."

WARREN KOONTZ, CHIEF INVESTMENT OFFICER OF LARGE-CAP VALUE

AT LOOMIS SAYLES & CO, BOSTON, WHICH OWNS MERRILL SHARES

"Looks like they are clearing the decks pretty well here. It does certainly take down their CDO exposure, makes their capital position better. And of course they've got a decent chunk of that capital raise already committed.

"Certainly there's going to be dilution.

"(John Thain) got handed a bag of tough goods and so I think he's certainly doing the best he can. He's making tough decisions that need to be made. Looks like to me he's moving as quickly as he can and as prudently as he can to move forward."

(Reporting by Dan Wilchins, Jonathan Spicer, Chris Sanders, Pedro Nicolaci da Costa in New York; Muralikumar Anantharaman in Boston; and Doris Frankel in Chicago)