Mitsubishi is on the verge of proceeding with its $9 billion investment in Morgan Stanley (MS), and on almost the same terms as the companies originally agreed to. Given that Morgan Stanley’s stock has fallen nearly 60% since the deal was struck, this sets new heights of magnanimous. Mitsubishi isn’t even insisting on a government backstop.
The key term that has yet to be agreed to in the new deal is the conversion price of the preferred stock Mitsubishi will be buying. The WSJ reports that the price will drop from $31 to the “low $20s”. Mitsubishi will effectively be buying stock at this price, so the conversion price is critical. A “low $20s” price would still be a huge gift, considering that Morgan’s stock closed below $10 on Friday.
If the deal goes through on these terms, Mitsubishi will, at least temporarily, be saving Morgan Stanley’s neck. How long the reprieve lasts is anyone’s guess. If Egan Jones is right, and Morgan Stanley needs $60 billion of new equity, the celebration won’t last long.
But for today, at least, Mitsubishi wins the gentleman award
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