August 19, 2022

DealBook: Breaking Up Morgan Stanley

Morgan StanleyMark Lennihan/Associated Press

Analyst Brad Hintz has a solution for Morgan Stanley’s flailing stock price: Send the company to the chop shop.

In a report titled “Is The Firm Worth More Dead or Alive,” Mr. Hintz of Sanford C. Bernstein Company, concludes that breaking up the company could unlock its value.

“Investors have grown impatient with the performance of Morgan Stanley,” he wrote in a report released this morning. “To be sure our analysis is not an endorsement of Morgan Stanley dismantling its institutional trading operation, but makes an illustrative point that the market is overly discounting the firm’s inherent value.”

Shares of Morgan Stanley, which was badly bruised during the financial crisis, have taken a beating. The stock is currently trading below $23 a share, down from more than $30 earlier this year.

The firm’s chief executive, James P. Gorman, has made a number of fixes to the business. But the stock continues to languish as investors fret about the growth prospects of Morgan Stanley and the broader financial services sector.

So Mr. Hintz decided to break up the company and see what the parts were worth.

The company, he wrote, could liquidate its capital markets operation and pay a big one-time dividend of $8.66 to shareholders. The big three remaining businesses, its merger and advisery franchise, asset management and wealth management would be worth $31.47 a share, almost 30 percent higher than where the stock is currently trading.

In short, he thinks the stock may offer a good value at the current level.

“While the firm undoubtedly has its share of challenges, we believe current valuations offer an attractive entry point for long-term, value oriented investors,” he wrote.

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