Thursday’s coordinated move of seven major central banks cutting in synchronous interest rates by 50 bsp, gave the impression that the cavalry had finally arrived. Unfortunately, in this most unusual times where Wall Street’s maniac dealmaking has reached unprecedented and irrational levels, it may be a little too late for many co.’s. Including giants like Morgan Stanley (MS) whose shares after today’s trading plunged by more than 21% after earlier losing more than double that. To make matter worst, Moody’s came out warning on Friday that it might cut the firm’s long-term debt ratings, for no apparent fundamental reason I might add, intensifying concerns about Morgan’s outlook.
According to ClusterStock, it is now possible that the U.S. Treasury could end up taking a stake in the firm. The plan is to make the capital injection alongside Mitsubishi UFJ Financial Group Inc. Since on the MUFG subject ; the Japanese bank (nothing is confirmed at this point) may seek to renegotiate the terms of a planned $9 billion capital infusion for what was a 21% stake in the U.S bank when the deal was announced last month. And who can blame them?!. Based on Friday’s close of MS $9.68 per share, Mitsubishi UFJ’s investment would now buy more than 80% of the firm.
ClusterStock also noted that while the plan is still being formulated, it seems likely that it will be put in place, perhaps as early as this weekend. The exact terms, added ClusterStock, are still being discussed.
There are several competing theories right now out there in the blogsphere about Morgan Stanley’s future, mostly suggesting that the firm will be the first bank nationalized under Paulson’s $700 billion bailout bill. In addition, many discount claims that Morgan Stanley is well capitalized to weather the storm. Remains to be seen however, how this story will develop from this point forward.
Morgan Stanley’s entire market cap currently stands at $10.7 billion. Last time the bank holding company was worth $9 billion was in fiscal 1997 before it merged with Dean Witter.