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EVERYONE LOVES A DISCOUNT

Morgan Stanley announced its acquisition of E-Trade yesterday, in what is yet another consolidation in the brokerage industry. Looks like someone wore their deal sleds.

The $13B deal, which is expected to close in Q4 of this year, has MS paying $58.74 per share. This announcement will bring together a combined $3.1T in client assets, with E.T.’s portion making up a respectable $360B … which is the equivalent of saying Tom Brady and I have a combined net worth of $180.001M and are dating a model.

The reason for the szn

MS Chairman James Gorman promises that the deal will be great for its wealth management biz, and acts as another stable source of income. E.T. generates about $56B annually in deposits, something MS would refer to as an “area for improvement.”

The main play here, of course, is to convert E-Trade customers to MS ones, which is highly likely since millennials are too damn lazy to cancel anything (see the $60 in Blue Apron that I didn't cancel for the third week in a row).

The tie-up will bring together two very different types of clientele, i.e. the older wealthier traders on Morgan Stanley's platform, and the younger, tech-savvy traders who probably still live with the aforementioned MS clients (E-Traders).

MS investors didn’t seem to buy in, as shares fell 4.6% on the day. Ok, boomers. E-Trade jumped more than 21% during trading.

The bottom line ...

This deal was essentially made in the shadow of Charles Schwab's $26B acquisition of TD Ameritrade last year, showing that Morgan is fighting scared of Chuck. The end might soon be near for independent discount brokerages (sup TradeStation, FirsTrade), with acquisitions likely continue (looking at you, Goldman Sachs) as fast-growing fintech platforms with their disruptive ideas (zero-commission trades) change the game and attract new money. Thanks, Robinhood.

Morgan Stanley buys ETrade [WSJ]

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