Morgan Stanley in Distress

The good thing about the fact that both Goldman Sachs (GS) and Morgan Stanley (MS) just released their quarterly earnings is that we have up-to-the-minute information on what (they say) their book value is. For Goldman it's $99.30 per share; for Morgan Stanley it's $31.25.

So as of right now, Goldman, down 24.6% on the day, is basically trading at book value; Morgan Stanley, down 37.9%, is trading on a much more distressed, and distressing, price-to-book ratio of about 0.6.

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.

Oh, and one other thing: no, Goldman Sachs is not an acceptable acquirer for Morgan Stanley. It needs to be a big commercial bank with a solid deposit base. Um, any Canadians interested? The shortlist on this side of the border is looking decidedly, well, nonexistent, unless you include the US government as buyer of last resort.

Comments

[phdinsuntan...:]

I guess MS is a good partner for China banks

怎麼我的中國朋友想購買摩根士丹利？

2008 Sep 17 02:07 PM

[Smarty_Pants:]

Just when they say another one CAN'T.

Oops, there goes another rubber tree plant....

Dominoes EVERYWHERE.

No wonder gold is rebounding strongly.

2008 Sep 17 02:15 PM

[Ishortyou:]

they better merge fast or die!!!!!!!

2008 Sep 17 02:20 PM

[Caltorguy:]

RBC has ruled out US acquisitions for the time being. I never thought I would see the day though when a Cdn bank had a market cap more than GS and MS combined. Toronto is North America's new financial heavy weight!

2008 Sep 17 03:00 PM

[mlyn:]

The economist, Nouriel Roubini, stated that both GS and MS should seek buyers immediately. He also stated that the merger between BAC and Merrill was risky and that BAC overpaid. He did a series of interviews with Tech Ticker on Yahoo Finance yesterday.

2008 Sep 17 03:01 PM

[User 40581:]

Morgan Stanley at $19 per share has a market cap of 19.9 billion. Morgan Stanley's rescuer could be US Bancorp with a market cap of $58 billion. This of course would take the tacit approval of Warren Buffet the largest shareholder of USB. In normal times it could have been a foreign bank such as DB or HSBC, but the markets are moving too fast for them.

2008 Sep 17 03:01 PM

[Dean Witter:]

What in the Morgan Stanley earnings release indicates they are in distress? If you are talking about the bear raid by hedgie shorts, that is a stock price issue not a fundamental issue. Button-pushers like you who can't be bothered to do analysis is why the economy is in this situation in the first place. You bought without question on the way up and now selling without question on the way down. MS and certainly GS are not Lehman and Bear.

2008 Sep 17 04:50 PM

[Anti-Fool:]

"Oh, and one other thing: no, Goldman Sachs is not an acceptable acquirer for Morgan Stanley. It needs to be a big commercial bank with a solid deposit base."

Wow, almost the same thing Jim Cramer said...I believe the author is now shilling for Jim.

2008 Sep 17 06:33 PM

[a believer:]

Ahem.

The rapid-fire destruction of U.S. investment banking has been predicted for a VERY long time by the most reliable source in the universe. In fact, there was a decree.

So I say to those who will listen, don't bother investing in Morgan Stanley OR Golman Sachs. You will lose it all. Take heed!

'In you men accept bribes to shed blood; you take usury and excessive interest and make unjust gain from your neighbors by extortion. And you have forgotten me, declares the Sovereign LORD.'
Ezekiel 22:12

'He lends at usury and takes excessive interest. Will such a man live? He will not! Because he has done all these detestable things, he will surely be put to death and his blood will be on his own head.'
Ezekiel 18:13

2008 Sep 17 08:55 PM

[What A Farce:]

Well, stock price is certainly one indicator of distress. I also think that MS CDS obligations are also another cause for concern. Might MS be afected by the AIG bailout/conservatorshi... in the sense that it represents a credit event triggering CDS obligations?? That might certainly cause some distress.

2008 Sep 17 08:59 PM

[bryanz:]

Are you seriously quoting the bible as a predictor of the demise of MS and GS? Pardon the pun... but good lord you can't be serious.

2008 Sep 18 12:38 AM

[InspectorFox:]

Firesale by Morgan Stanley in India...Morgan Stanley is pressing sell — big time — in India. Sign of another impending collapse or an SOS merger? Unloads nearly 8% of its total holdings in India in a day. This is exactly how Bear Stearns proceeded in March before throwing in the towel. Doubts arise, because this was the exact path taken by two other Wall St giants, Bear Stearns and Lehman Brothers, before they went belly up in full public view.

2008 Sep 18 01:54 AM