Morgan Stanley eased investor worries about its future today, closing on its $9-billion deal with Mitsubishi UFJ Financial Group. With its share price freefalling to $9.68 last week—a one-week loss of $18 billion in value—Morgan Stanley sweetened its deal with its Japanese partner over the weekend.
That development, combined with news the U.S. Fed plans to follow England’s lead and invest directly in its failing banks, sent financial services stocks shooting higher in trading Monday. Morgan Stanley was up 74 percent in early afternoon trading (MS).
While Mitsubishi will still pay $9 billion for its stake in Morgan, the securities included in the package, as well as the terms, have changed. Mitsubishi is now getting only preferred stock, instead of a mix that would have included $3 billion in common stock. Some $7.8 billion will be perpetual noncumulative convertible preferred shares and $1.2 billion will be nonconvertible preferred shares.
The dividend on the preferred stock remains 10 percent as per the original deal, but the conversion price of the shares was lowered from $31.45 per share to $25.25. To view the Morgan Stanley press release, click here.