Boy, there have been bigger bad investments (TPG putting $7 billion into WaMu comes to mind) but seldom has one come cropper as quickly as Mitsubishi UFJ’s $9 billion interest in Morgan Stanley. The bank took a cool $500 million one-day loss.
Mitsubishi UFJ Financial Group Inc. took a $506 million paper loss on its $9 billion investment in Morgan Stanley yesterday after the rejection of the U.S. financial rescue plan sent banking stocks tumbling.
As part of the deal, the Tokyo-based lender agreed to buy $3 billion of Morgan Stanley’s common stock for $25.25 a share. The second-largest U.S. securities firm plummeted 15 percent in New York Stock Exchange composite trading to close at $20.99.
The loss underscores the risks involved for Asian companies seeking bargains in the wreckage on Wall Street. Morgan Stanley, Citigroup Inc. and Merrill Lynch & Co. have tapped the region’s banks and sovereign wealth funds for money in the past year as falling U.S. home prices triggered the worst financial crisis since the Great Depression.
“It’s increasingly difficult to know what’s going to happen,” said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. “The U.S. bailout plan was the big change we hadn’t had before, but that’s gone now, so things can only get worse.”