This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The 5 Dumbest Things on Wall Street This Week: Sept. 14

3. Investment Bank Insanity

Citigroup (C - Get Report) said its brokerage joint venture with fellow investment bank Morgan Stanley (MS - Get Report) was worth $22 billion. Morgan Stanley, on the other hand, valued the unit at $9.5 billion on its books.

So which bulge-bracket firm got the price right? Who won Tuesday's showcase showdown over Morgan Stanley Smith Barney (MSSB)?

Hold on. Don't shout out your guesses just yet. Before doing so, we want you to remember that bot firms are handsomely paid by business owners and investors alike for their valuation prowess. Whether it's pricing an Internet company on its way to an IPO or a pipeline for an acquisitive oil company, that's what these guys do each and every day. Dentists pull teeth. Investment bankers discount cash flows.

Alright. With all that in mind, and without any further ado, the winner is: Neither one of those jokers.

According to independent arbiter Perella Weinberg, the brokerage business in question is worth the grand sum of $13.5 billion.

Remember the Oscar Wilde quote about people knowing "the price of everything and the value of nothing"? Well, these guys clearly don't know either.

Of course, the whole stupid exercise was just another Wall Street parlor game anyway since Morgan Stanley, which is in the process of buying MSSB, submitted a low-ball bid to get a better price while Citigroup aimed way too high for the same exact reason. And as for the pencil-pushers at Perella Weinberg, well, who knows if they got their appraisal exactly right? Essentially all they did was split the baby in half.

The sour news for Citigroup, however, is that they got the bad half.

As a result of Perella Weinberg's binding decision, Morgan Stanley will up its 51% stake in the MSSB by 14% and will buy Citigroup's remaining 35% stake by June 1, 2015. Citigroup, on the other side of the ledger, will take a $2.9 billion after-tax loss related to MSSB in its third-quarter results.

"This mutually beneficial agreement gives both parties certainty and transparency on price and timing, and is a significant milestone for Morgan Stanley in the implementation of our strategy," gloated Morgan Stanley CEO James Gorman in a statement.

Mutually beneficial? Get off it Gorman. Perella's price may be righteous in your view, but that doesn't make it right.
3 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
TIBX $24.03 0.00%
C $55.24 0.66%
NOK $6.85 -0.87%
MS $38.79 1.25%
WYNN $98.67 5.05%

Markets

DOW 17,619.51 +23.16 0.13%
S&P 500 2,063.12 +5.48 0.27%
NASDAQ 4,986.8670 +28.3990 0.57%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs