Morgan Stanley Prices Stock, Debt Offerings

Updated from Thursday, May 7.

Morgan Stanley (MS Quote) on Friday priced larger than expected stock and debt offerings Friday, a day after government stress tests determined the company needed another $1.8 billion in capital.

Morgan said it would sell 146 million shares of common stock at $24 per share, to raise a total of $3.5 billion. Underwriters will have a 30-day option to purchase up to an additional 21.9 million shares. The stock closed Thursday at $27.14.

The company also priced a public offering of $4 billion in aggregate principal amount of senior notes. The notes will not be guaranteed by the Federal Deposit Insurance Corp., which would -- if offered for a term of more than five years -- satisfy one of the criteria for repaying the federal government's $10 billion investment made through the Troubled Asset Relief Program. Morgan Stanley has indicated it wants to do that as soon as possible.

Both the debt and stock offerings were larger than Morgan had indicated on Thursday, when it said it would raise $2 billion in stock and $3 billion in non-government backed debt.

Morgan Stanley shares were falling 6.6% to $25.36 in recent trading.

The Federal Reserve announced Thursday the bank would need to raise $1.8 billion to satisfy government regulators following much-anticipated "stress tests," of Morgan Stanley and 18 other large banks, including Citigroup (C Quote), Goldman Sachs (GS Quote), JPMorgan Chase (JPM Quote) and Wells Fargo (WFC Quote).

Citi and Wells Fargo also are selling stock to raise capital after the stress tests.