Morgan Stanley Gets $5B Cash Infusion After Huge Q4 Loss

Wall Street investment bank Morgan Stanley (MS) reported a larger-than-expected loss Wednesday, after revealing an additional $5.7 billion writedown to add to its previously stated $3.7B writedown. It also announced a $5 billion cash infusion from China Investment Corp. Morgan Stanley said it lost $5.8 billion ($3.61/share) in Q4, compared to a profit of $2.27 billion ($1.44/share) in Q4 2006. Net revenue was -$450 million, because of the writedowns, vs. revenue of $7.75 billion a year ago. Results widely missed analyst projections of -$0.39/share on revenue of $4.23 billion; analysts did not account for the additional writedown.

Morgan Stanley said last month it would take a $3.7 billion writedown charge for losses on credit market investments. Today, however, it revealed a total writedown of $9.4 billion, which effectively reduced earnings by $5.80/share. "The writedown Morgan Stanley took this quarter is deeply disappointing -- to me, to our colleagues, to our board and to our shareholders," CEO John Mack said. "Ultimately, accountability for our results rests with me, and I believe in pay for performance, so I've told our compensation committee that I will not accept a bonus for 2007," (full earnings call transcript later today).

The company also said China's government-controlled investment vehicle, China Investment Corp., has invested $5 billion through equity units that convert into common stock. The cash, it said, will help to bolster its capital position and enhance growth opportunities globally.

Shares rallied initially on the news of the large foreign capital infusion. They went south, but are currently +1.3% at $48.71 at the open.

Sources: Press release, AP
Additional Reading: Goldman, I-Banks Drop on Firm's 'Horrible' November

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Comments

[Long-Short Guy:]

What an unbelievable mess up. Morgan Stanley was supposed to be smarter than the other banks; now look. Like the others, it's had to sell a chunk of itself to investors in China and/or the Middle East.

How the mighty have fallen.

2007 Dec 19 12:19 PM