Morgan Stanley Pulls Mitsubishi Miracle Out of Hat

Hand it to John Mack and Morgan Stanley, who somehow managed to persuade Mitsubishi to go forward with its $9 billion investment on terms that are extraordinarily favourable to Morgan Stanley. Mitsubishi made some minor adjustments to the original deal, but the key term–the conversion price of the preferred stock–remains very generous to Morgan Stanley shareholders.

Specifically, $7.8 billion of Mitsubishi’s preferred is convertible into Morgan Stanley common at $25.25 per share, which is more than twice the sub-$10 Friday closing price. As a result, Morgan Stanley sharheholders will only have to give up 21% of the company in exchange for the $9 billion.

This investment may not be anywhere near enough to save Morgan Stanley, so shareholders may still be threatened. The Treasury has reportedly also agreed to shield Mitsubishi from further dilution if the Treasury has to invest new equity, so this means that current Morgan Stanley shareholders are even more exposed.

For today, however, Morgan Stanley has pulled out a miracle.

See Also: Treasury Promises Not to Wipe Out Mitsubishi

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