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Morgan Stanley Pulls Mitsubishi Miracle Out of Hat
Posted Oct 13, 2008 09:27am EDT by Henry Blodget in Investing, Recession, Banking
From ClusterStock.com, Oct. 13, 2008:
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 favorable 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.
23 Comments
Chris, Chrissy - Monday October 13, 2008 11:33AM EDT
Morgan Stanley bought that huge block of overpriced, luxury, hotels and spa resorts at the top of the market in 2007 from CNL. Maybe the Japanese want to get back into overpriced US real estate---like the 1980's Pebble Beach deal.
sportsmadness - Monday October 13, 2008 12:08PM EDT
I wonder if the U.S. will become a communist country. I wonder if the government will soon censure how we eat, have relationships, exercise, drive a car, speak, go to the bathroom, purchase, save money and anything else we do in life. Knda scary isnt it.
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Yahoo! Finance User - Monday October 13, 2008 11:28AM EDT
Nick k and ralphjarmon. You got it correct