Update: So what exactly happened to Morgan Stanley on Thursday. Well, its share price dropped nearly 26%, but we’re still not sure why. The New York Times posits it had a lot to do with the bank’s Mitsubishi deal:
Much of the concern centered on Morgan Stanley’s deal to raise $9 billion from Mitsubishi UFJ of Japan. Despite repeated assurances from Mr. Mack and Mitsubishi executives, some investors worry that the decline in Morgan Stanley’s share price, coupled with the steep sell-off in the Japanese stock market this week, might prompt Mitsubishi to reconsider its investment. Morgan Stanley hopes closing the Mitsubishi deal will help ease the burden on its shares the way Warren E. Buffett‘s $5 billion infusion helped stabilise Goldman Sachs…
Meanwhile, Moody’s Investors Service said it put Morgan Stanley’s A1 long-term credit rating on a review for a possible downgrade. Moody’s also said it cut its outlook for Goldman Sachs’s Aa3 long-term rating to negative…
Morgan Stanley executives said both sides would close the Mitsubishi deal immediately if they could. But when the Federal Reserve approved the investment this week, it said it could not officially close until Monday.
The trouble is, Monday is a bank holiday in both the United States (Columbus Day) and Japan (Health and Sports Day), so the transaction cannot close until Tuesday. This is frustrating to many inside Morgan Stanley, who have decided they just have to stomach a full-on assault on their stock until the deal is done, and perhaps even see the shares dip into the single digits.
Earlier: Something, possibly the end of the short-selling ban, caused Morgan Stanley’s stock to drop 25% earlier today. Fortunately shares in the bank seem to have rebounded. But what’s going on over there?
Clusterstock speculates about what’s eating John Mack’s firm:
There are many competing theories about what is ailing Morgan Stanley today. The first has an amusing snake-eating-its-tale quality about it. It holds that that the widening CDS spreads and falling share prices may drive Mitsubishi UJF, whose executives are meeting with Mack tonight in London, to rethink its capital infusion. Another says that the redirecting of the TARP into an equity purchase fund may be aimed directly at rescuing Morgan Stanley. We don’t have information either way, but we welcome your ideas.
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