Stock of the Day
|
Morgan Stanley (MS)
Can the Market Support Another Stock Offering for Morgan Stanley?
With all eyes focusing on the bankruptcy of the nation's largest automaker, GM (GM: Charts, News, Offers), attention has temporarily been shifted away from the troubled banking sector. Today, Morgan Stanley announced that it plans to raise $2.2 billion as part of plan to satisfy preconditions for repaying the TARP money it received last fall amid the credit crisis. The company's latest stock sale comes hours after JPMorgan Chase (JPM: Charts, News, Offers) and American Express (AXP: Charts, News, Offers) announced unexpected plans to sell shares. Amidst all of the stock offerings, will Morgan Stanley be able to raise the necessary capital to pay off TARP?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
|
| InvestorGuide is Hiring - Join our Team! |
| InvestorGuide is looking for intelligent, high-energy, self-motivated professionals to fill our exciting positions. We are currently hiring for a wide variety of positions, including Vice President, Senior Ad Sales Executive, and Senior Web Developer. For more information about the positions and our company, or to apply, visit our Careers page today! |
|
| Stock Analysis |
Morgan Stanley was among 10 of the 19 firms subjected to stress tests that were deemed to need more capital. Morgan Stanley, which last month raised $4.57 billion, was told to raise even more capital. As a result, Morgan Stanley will need to raise an additional $2.2 billion dollars. It has priced the offering at $27.44 per share, an 8.2% discount from Monday's closing price of $29.89. Based on the price, Morgan Stanley will issue about 80.2 million shares of common stock. Current shareholders China Investment Corp. and Mitsubishi UFJ Financial Group Inc. agreed to purchase 44.7 million and 16 million shares, respectively. As of the first quarter, Morgan Stanley had approximately 1.1 billion shares outstanding. As much as 5% more shares could be sold if there is sufficient investor demand, which is fewer than the usual 15% overallotment.
|
Morgan Stanley, like other bank holding companies such as Goldman Sachs (GS: Charts, News, Offers) has expressed strong interest in repaying TARP (Troubled Asset Relief Program) this summer. However, the new rules of the Federal Reserve which affect the 19 largest bank-holding companies appear to be much more stringent than the rules applied to smaller banks. The government has said that in order for a bank to repay the money it received under TARP, it must be able to access public equity markets and have proper capital. We have seen the equity markets rallying significantly in the past few months along with signs that the credit markets have been reopening. This has given banks the ability to raise cash through stock offerings. Banking giant, Bank of America (BAC: Charts, News, Offers) has raised almost $33 billion.
|
Like other bank holding companies, Morgan Stanley will likely be able to easily raise capital to meet the TARP requirements because of this market rally. It has several international investment companies that have taken a large stake in Morgan Stanley to ensure it has the necessary funds. Last fall as the credit crisis worsened, financial firms were essentially shut out of raising new capital to help protect against losses, forcing them to take the government loans to boost their balance sheets. Morgan Stanley received $10 billion as part of the $700 billion program that it wants to repay. Besides stock offerings, it has raised capital by selling its remaining stake in indexing and analytics business MSCI Inc. It also completed a joint venture deal on Monday with Citigroup Inc. (C: Charts, News, Offers) that gives it control of Smith Barney to help provide a more-stable earnings stream. Morgan Stanley was down about 3.8% as of 12:30 PM. The stock is up about 80% this year.
|
Profile |
Click here to view a detailed profile of Morgan Stanley.
|
|
|
|
|
