8-KLeadership ChangesAcquisitions & DispositionsShareholder Matters+4

MORGAN STANLEY 8-K Report, Acquisition Completed (Oct 2, 2020)

Filed October 2, 2020For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley (MS) has filed an 8-K report announcing the successful completion of its acquisition of E*TRADE Financial Corporation on October 2, 2020. The transaction was structured as a merger where E*TRADE became a wholly owned subsidiary of Morgan Stanley. E*TRADE common stock shareholders received 1.0432 shares of Morgan Stanley common stock per share, along with cash for fractional shares. Preferred stockholders of E*TRADE received newly issued Morgan Stanley preferred stock Series M and N, respectively, with comparable rights. This acquisition marks a significant step for Morgan Stanley, expanding its reach into the direct-to-consumer online brokerage space. The filing also details the appointment of Shelley B. Leibowitz, a former E*TRADE director, to Morgan Stanley's Board of Directors. Additionally, Morgan Stanley has established terms for the new preferred stock series issued as part of the transaction, which introduce certain restrictions on dividend payments and stock repurchases for Morgan Stanley's common and parity stock if preferred dividends are not met.

Key Highlights

  • 1Morgan Stanley has officially completed the acquisition of E*TRADE Financial Corporation as of October 2, 2020.
  • 2E*TRADE common stockholders received 1.0432 shares of Morgan Stanley common stock per E*TRADE share, plus cash for any fractional shares.
  • 3E*TRADE preferred stockholders received newly issued Morgan Stanley Series M and Series N preferred stock, designed to have substantially similar rights.
  • 4Shelley B. Leibowitz, formerly a director at E*TRADE, has been appointed to Morgan Stanley's Board of Directors.
  • 5The completion of the merger introduces new risk factors for Morgan Stanley, including challenges in integration and increased exposure to the direct-to-consumer online brokerage business.
  • 6Morgan Stanley has filed Certificates of Designation to establish the terms of the new Series M and Series N Preferred Stock, which include provisions impacting future dividend and repurchase policies for other stock classes.
  • 7The filing incorporates a joint press release from Morgan Stanley and E*TRADE announcing the completion of the transaction.

Frequently Asked Questions

This 8-K filing announces the completion of Morgan Stanley's acquisition of E*TRADE Financial Corporation. It details the consummation of the merger, the consideration paid to E*TRADE shareholders, and related corporate governance changes.

E*TRADE common stockholders received 1.0432 shares of Morgan Stanley common stock for each share of E*TRADE common stock they owned. Holders entitled to fractional shares received cash in lieu thereof. E*TRADE preferred stockholders had their shares converted into equivalent Morgan Stanley preferred stock (Series M and Series N).

Morgan Stanley highlights risks related to the successful integration of E*TRADE's business, including achieving anticipated synergies and cost savings, rationalizing technology platforms, and managing potential disruptions. They also face increased exposure to the risks inherent in the direct-to-consumer online brokerage industry, such as interest rate sensitivity, operational risks from online platforms (cybersecurity, technological failures), and regulatory compliance.

Yes, as part of the acquisition agreement, Shelley B. Leibowitz, who previously served as a director of E*TRADE, was appointed to the Morgan Stanley Board of Directors, increasing the board size from 14 to 15 members.