Chinese Government Taking Almost 10% Ownership of Morgan Stanley After Subprime Losses
December 19th, 2007Via: AP:
Morgan Stanley, the No. 2 U.S. investment bank, on Wednesday reported a larger-than-expected fiscal fourth-quarter loss due to a $9.4 billion writedown from its exposure to subprime and other mortgage-related investments.
The company also said China’s government-controlled investment vehicle has invested $5 billion to help replenish its capital.
China Investment Corp., which also owns a stake in private-equity firm Blackstone Group LP, will control no more than 9.9 percent of Morgan Stanley once its investment converts to common shares in 2010.
“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. “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.”
The equity units the Chinese fund purchased from Morgan Stanley will yield 9 percent per year before they are converted into common shares on Aug. 17, 2010. The fund will have no special rights of ownership or any role in management of Morgan Stanley, the company said.
Wow. More often than not owning a mere five percent of a publically-held corporation amounts to effective ownership.
…And the number one investment bank pays $20byn in bonuses to its staff, having deftly avoided breathing in the poison.