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Wednesday, September 17, 2008


morgan stanley in distress

following on yesterday's news (yesterday!), felix salmon today:

So as of right now, Goldman, down 23% on the day, is basically trading at book value; Morgan Stanley, down 31%, is trading on a much more distressed, and distressing, price-to-book ratio of about 0.63.

For comparison, Merrill Lynch's price-to-book ratio, based on its second-quarter book value of $21.43 per share, is presently about 0.91. Of course, Merrill is a merger-arb play, not a value play. But clearly the market is saying that Morgan Stanley should find an acquirer fast. It's directly across the street from Lehman Brothers: its executives are reminded every time they look out the window what the alternative is.

maybe they're next.

UPDATE: yes they are next -- alea notes the fed's TSLF auction today was an epic disaster. this is the funding facility that is intended to backstop the i-banks. ft alphaville notes that MS CDS are trading with 14% demanded up front.

UPDATE: wachovia? so morgan stanley is going to work for the FDIC?

UPDATE: john mack knows the end is near, but he apparently could not convince citi to save morgan stanley.

“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested. [Citi] is thinking of deals it can strike with consumer banks, like buying Washington Mutual out of bankruptcy, that would provide it with cheaper deposit funding.

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