The House of Gorman will be saying good-bye to a few thousand Little Jims before year-end. Read more »
Morgan Stanley
The House of Gorman is said to be in the process of letting some employees down easy. Read more »
The role of the hero who has been in the belly of the beast and emerged to slay it seems to be psychologically rewarding,* because people keep trying to claim it for themselves. Like this Geoffrey Tomes gentleman, who bared his soul to tell DealBook that he “was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm.” You imagine him racing to tell DealBook about this revelation, imagining his welcome into the Greg Smith Hall of Heroes, and being a little disappointed that everyone was all “wait, what, did anyone on earth not know that was exactly what you were doing? Why did they think you were pushing JPMorgan products? That’s what banks do.”
Similarly there is a certain amount of “duh, obvs” to the recently unsealed documents in the lawsuit over the Cheyne SIV. But they’re still funny. Cheyne was a conduit stuffed with mortgages and home equity loans that exploded in the face of some people, who are now suing Morgan Stanley, who built it, and the rating agencies, who did sort of a not-so-great job of kicking its tires. From their filing unsealed yesterday: Read more »
Moody’s Investors Service downgraded the debt ratings of 15 major international banks and securities firms on Thursday, a move that could cost the banks billions of dollars in extra collateral…U.S banks that were downgraded included: Bank of America, Citigroup, Goldman Sachs, JPMorgan, and Morgan Stanley. “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” Moody’s said in a statement. “However, they also engage in other, often market leading business activities that are central to Moody’s assessment of their credit profiles,” the firm added. “These activities can provide important ‘shock absorbers’ that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges.” [CNBC, related]
Although the Morgan Stanley’s handling of the social media site’s disastrous stock offering is under scrutiny by just about every business news outlet under the sun, a Wall Street insider tells us the investment banking’s corporate communications warriors are blaming CNBC for engaging in some pre-IPO hyping of their own. CNBC senior vice president and editor in chief Nik Deogun “is under fire,” says the source. “Morgan Stanley is telling him, ‘How dare you criticize us when you guys promoted this IPO worse than anybody.’ ” The source recalls examples of CNBC’s on-air exuberance in the days leading up to the IPO, including treating Facebook CEO Mark Zuckerberg ’s entrance at the kick-off of the company’s investors road show at the Sheraton hotel in midtown as if it were “the President’s State of the Union Address” with multiple cameras and reporters. Then on May 17, the day before the actual IPO, the hosts of CNBC’s “Fast Money” appeared on camera wearing hoodies — a reference to Zuckerberg’s favorite fashion item, which came off like an homage to the baby billionaire. That same day, controversial “Mad Money” host Jim Cramer told his viewers, who tend to be mom-and-pop investors and market-playing college students, “If you can get in on the actual IPO, then I think Facebook is a no-brainer.” He added: “We all know this one’s going to pop like crazy on its first day of trading, so if you can get in on the deal, I think you should try to get your hands on as many shares as possible.”…CNBC spokesman Brian Steel said: “CNBC’s Facebook coverage has been widely acknowledged as fair, balanced and insightful.” [NYDN, related, related]
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Posted in:
FaceBook
Morgan Stanley Won Its Lead Role On The Facebook IPO By Showing Mark Zuckerberg A Picture Of A Pretty Pretty Sports Car
By Matt Levine
Here is a detail from the Wall Street Journal’s article today about how Morgan Stanley tech banker Michael Grimes excluded the other underwriters from having much of an active role in managing and pricing the Facebook IPO and I cannot stand how good it is:
A page of his pitch book to other companies,* which he calls the “Driver/Navigator Model,” shows a black sports car. A company about to go public, the pitch reads, must choose between a “single driver [who] operates the steering wheel, gas, brake and clutch,” or the “two driver model, where the car literally has an extra steering wheel, gas, brake pedals and clutch for a second driver.” Morgan Stanley, the pitch says, “favors the sole bookrunner approach.”
Imagine being persuaded by that! You could construct a hierarchy of pitchbook pages based on how persuasive they’d be to a rational person; I’m the sort of person who tends to find tables of numbers most compelling, followed by charts (I know, I know), followed by functional diagrams of functional things (“we put the mortgages in this green box, and then sell them to this red box”), followed I guess by pages of texty bullet points, followed last of all by METAPHORICAL CLIP ART.** Read more »
Morgan Stanley’s Lead Tech Banker Put A Now-Awkward Clause In His Facebook IPO Contract
By Bess Levin
In snaring the most coveted investment-banking assignment of the year, Morgan Stanley’s Michael Grimes insisted to a senior Facebook executive that he be the “single driver” of the company’s initial public offering, adding that if the deal soured, it would be his “throat to choke. [WSJ]
James Gorman is approaching cost-cutting with the same focus as the Zodiac killer, so maybe. Read more »
Supposedly summer cuts are under consideration at all firms. Read more »
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Posted in:
Banks
Morgan Stanley Will Soon Not Share Its Research Estimates With 14% More Retail Customers
By Matt Levine
Morgan Stanley has announced that it will be buying 14% of its Morgan Stanley Smith Barney joint venture from Citi in a sort of glacially negotiated way. MS currently owns 51% of MSSB (plus $5.5bn of preferred interests), and Citi owns the other 49% (plus $2bn of preferred). You can read how they’re going to figure out the price here. Basically they each hire an advisor to value MSSB like a public company, and then get together and see how close they are. If they’re within 10% of each other, they average their prices; if not, they hire a third advisor to figure out who got closer to the right answer. Don’t get too excited about pitching to be one of those advisors, though, at least not in the first round:
Morgan Stanley and Citigroup each will engage one investment bank or financial advisory firm of national standing and with experience in the valuation of securities of financial services companies (an “Appraiser”) for purposes of estimating FMV. All fees and disbursements of the first two Appraisers shall be the responsibility of the party that engaged such Appraiser. Either or both of the first two Appraisers may be an affiliate of the party engaging such Appraiser, and Morgan Stanley has engaged Morgan Stanley Investment Banking as its Appraiser.
MSSB’s net income was about $300mm last year*, and recent Morgan Stanley Investment Banking valuation precedents suggest about a 100x P/E, so I’ll go ahead and predict we’ll see a $30bn-ish valuation from them, no? (Too easy? Actually, ha, it’s not that wildly off; press reports suggest a $15bn bid from MS and a $23bn offer from Citi.) Here’s how they’ll do their math: Read more »
Then we’ll see what’s what. Until then? Step off, bitch. Read more »
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