Is it a day that ends in y? Because if it is, Morgan Stanley’s stock is going to drop. It’s down nearly 40 per cent today. The total market cap is now just $8.5 billion. That’s less than the $9 billion investment Mitsubishi promised to make in exchange for just 20 per cent of the company. For some reason, Morgan and Mitsubishi keep insisting the deal cut $12 billion dollars ago is still going to stick.
The market doesn’t seem to believe them, and the rating’s agencies are having their doubts as well. Yesterday S&P signalled a cut is likely on the way. Today Moody’s Investors Service said it may reduce the U.S. investment bank’s credit rating.
“The analogy is a snowball rolling down a mountain; the mass needed to stop that negative momentum increases as that snowball picks up speed and size,” Egan-Jones’s Sean Egan tells Bloomberg. “Perception trumps reality. They need a massive injection to stop the slide and hopefully they don’t commit the Bear Stearns or Lehman mistake.”
We get the idea but calling Morgan Stanley’s problems a snowball is a bit like calling a tsunami a ripple. This thing is an avalanche.