More Subprime Writedowns for Morgan Stanley as it Sells Stake to China
Morgan Stanley took $9.4 billion in mortgage-related write-downs in fourth-quarter losses and announced a $5 billion investment from China's sovereign wealth fund.
The second-largest brokerage firm by market value reported a net loss for the quarter ended Nov. 30 of $3.59 billion, or $3.61 a share, compared with a year-earlier net income of $1.54 billion, or $1.44 a share.
The $9.4 billion in write-downs compare with the $3.7 billion the company announced last month. At that time, Morgan Stanley said the write-downs could increase if the market continued to worsen. The total includes $7.8 billion in subprime-related write-downs.
The company reported negative revenue of $450 million as the write-downs subtracted from revenue. Year-earlier revenue was $7.85 billion. The mean per-share loss estimate of analysts polled by Thomson Financial was 39 cents on positive revenue of $4.23 billion.
"The writedown Morgan Stanley took this quarter is deeply disappointing -- to me, to our colleagues, to our board and to our shareholders," said Chairman and Chief Executive John Mack. Mr. Mack said the he will forego his 2007 bonus, saying accountability rests with him.
Across the firm, we have moved aggressively to make the necessary changes, and these isolated losses by a small trading team in one part of the firm should not overshadow the momentum we see in virtually all of our other businesses."
China Investment Corp. will be acquiring up to a 9.9% stake in the company through buying equity units that covert into common stock. CIC, which has some $200 billion in asset, bought a $3 billion stake in Blackstone Group as part of the U.S. private-equity firm's June initial public offering.
Source: Source: Wall Street Journal | Published on December 19, 2007
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