Update (3:01): Shares are still down, and dropping again as we enter the last hour of trading. Has everyone completely lost confidence in reassurances from investment banks? That would make sense. After all, Lehman was saying it didn’t need to raise capital the day after concluded it needed billions.
Shares of Morgan Stanley were down 35 per cent today when investors figured out they didn’t own shares of JP Morgan.
That isn’t right? So maybe it was the rumour that Mitsubishi UFJ Financial Group had pulled out of it’s deal to buy a stake in Morgan Stanley. This was supposed to be a good day for Morgan Stanley, after it got approval from the Federal Reserve last night on its deal to sell Mitsubishi 24.9 per cent of its voting shares, and Mitsubishi was granted financial holding company status. Instead it ended up getting served a huge loaf of panic from the rumour mill.
Morgan Stanley has reportedly denied the rumours, saying the deal is “on track” to close this weekend. The shares have climbed a bit but are still down more than 20% for the day.
Keep in mind that short selling shares of Morgan Stanley is still illegal. We’re sure that the usual public scolds will somehow find a way to conclude rumours were spread by short sellers anyway.
For what it’s worth, here’s Morgan’s official statement:
“We have received the key regulatory approvals for Mitsubishi’s $9 billion investment in Morgan Stanley. The deal has been approved by the FSA in Japan and by the Federal Reserve in the U.S. The transaction is expected to close imminently upon expiration of the Federal Reserve five-day post-approval waiting period.”