Traded Corporate Finance: Morgan Stanley 1

Morgan Stanley

Francielly Cristina de Freitas

Fitchburg State University

MGMT - 9170

February 12, 2023

Professor Gary S. Farr

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Introduction

Since its founding, Morgan Stanley has consistently produced first-class business in a

first-class way. On September 16, 1935, Morgan Stanley officially began operations at 2 Wall

Street in New York City, next to J.P. Morgan. By the conclusion of its first full year of activity,

Morgan Stanley had a 24% market share of negotiated corporate and overseas offerings. By

1938, Morgan Stanley had overtaken all other New York investment companies in the number of

original bond issues. (Lilla Zuill. November 15, 2007).

In its history, Morgan Stanley has had two structures, partnership and corporation. It began as a

partnership, and as the firm developed and grew over time, in 1997, it became a publicly traded

company, a corporation. (Amanda, O. M.,& Matt M. 2008) The change in structure allowed the

company to raise capital more efficiently and pursue growth opportunities while maintaining the

traditions and values that had made it a leading player in the financial services industry.

Furthermore, as a corporation, Morgan Stanley could issue shares of stock, which gave the

company greater flexibility in financing its operations and growth initiatives.

Founders

Henry Sturgis Morgan and Harold Stanley merged their respective firms to form Morgan

Stanley in 1935. The new firm was well-positioned to take advantage of the growing demand for

financial services and rapidly became a pioneer in its field. He was born in 1867 in New York

City and was the grandson of J.P. Morgan, one of the most prominent bankers of the 19th

century. After working at J.P. Morgan & Co. for several years, Henry S. Morgan established his

brokerage firm, Henry S. Morgan & Co., which specialized in underwriting and issuing bonds.

(Wolfgang Saxon. February 8, 1982).

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Harold Stanley was born in 1885 in Pennsylvania. He began his financial career as a runner for a

brokerage company. Eventually, he rose through the ranks to partner at a brokerage firm and

worked up to become a partner at Richard Whitney & Co. In 1909, Stanley founded his

brokerage firm, Harold Stanley & Co. The firm focused on helping clients navigate the stock

market and was known for its strong reputation and client relationships. (Amanda, O. M.,& Matt

M. 2008).

Locations, Employee, Products, and Services

Currently, Morgan Stanley has around 60,000 employees worldwide and offers various

services and products, such as investment banking services, securities underwriting, mergers and

acquisitions guidance, and wealth management services for private clients and public entities.
Figure 1

Location of Morgan Stanley Officers and Year Founded.

Note. Figure created in Excel. Own work. Source: Morgan Stanley.

https://www.morganstanley.com/about-us/global-offices.

CEO

James Gorman, an Australian-American business executive, is the current CEO of

Morgan Stanley. He became the company's President and Chief Operating Officer in 2006. Since

2010, he has served as the CEO of Morgan Stanley, an international investment bank and
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provider of financial services. Gorman previously held positions at several major financial

institutions, including Merrill Lynch and McKinsey & Company. Gorman is generally regarded

as a pioneering leader in the financial services sector and has won various awards for his

achievements. (Patrick Durkin, 2008).

Current financials

Morgan Stanley's market capitalization was approximately $150.95 billion in December

2011. Total revenues for Morgan Stanley were roughly $40.6 billion in 2021 and $53.7 billion in

2022. Daniel Jonas (2022). The company's sales ratios for 2021 include a price-to-earnings ratio

of 11.6 and a return on equity of 9.7%. (Forbes. May 12, 2022). Morgan Stanley's shares are

currently trading at $51.27 per share. This stock price seems reasonable considering the

company's recent success and the market's current state. The stock price of Morgan Stanley has

been constant over the previous few months, and the company has had solid financial results.

The average stock price is greater than that of its competitors, indicating that the market is

optimistic about the company's future prospects.

Comparison between Morgan Stanley vs. JP Morgan

Due to their similar names, they are separate organizations with unique histories,

corporate cultures, and business approaches. Even though JPMorgan is one of the major financial

service providers internationally, it focuses more on trading and investment banking than

Morgan Stanley. It is $3.3 trillion in assets and $2.5 trillion in liabilities, giving it a more

significant equity position than Morgan Stanley. Morgan Stanley has a price-to-book ratio of 1.4

compared to JPMorgan's 0.7. This demonstrates that investors are willing to pay more for

Morgan Stanley's shares because they have a low-risk profile, a strong balance sheet, and an

attractive price-to-book ratio. (Dave Kovaleski, 2022).

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SWOT Analysis

A SWOT analysis may assist businesses in making knowledgeable decisions about how

to distribute resources and prioritize efforts by recognizing opportunities and threats.

Figure 2

SWOT Analysis of Morgan Stanley

Note. Figure created on Canva. Own work.

Source: https://www.marketresearch.com/MarketLine-v3883/Morgan-Stanley

Financial Uncertainty

Given the current financial uncertainty, there are several steps that Morgan Stanley could

take to plan for success going forward:

Invest in technology: By incorporating cutting-edge tools and creative ideas, Morgan

Stanley may enhance its products and services, boost productivity, and better serve the changing

demands of its clients.

Diversify revenue streams: It may be possible to decrease the company's dependence on

any one business line and boost overall stability by diversifying its income sources by creating

new goods and services and business ventures.

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Manage risk effectively: It is critical for financial firms like Morgan Stanley to manage

risk efficiently during unpredictable times. This could entail creating reliable risk management

processes and systems and periodically assessing and updating them to ensure they stay

applicable and efficient.

Build a strong team: Investing in the development and training of its employees could

help Morgan Stanley attract and retain top talent and enhance the skills and capabilities of its

workforce.

Adapt to changing market conditions: Since the financial services sector is constantly

changing, it is critical for businesses like Morgan Stanley to be quick to respond to shifting

market conditions. This can entail expanding into new areas, changing its product offerings, and

routinely reevaluating its business approach.

Ultimately, Morgan Stanley's specific course of action will rely on its strategic

objectives, the state of the market, and other variables. However, the business can set itself up for

success in the future by approaching planning in a proactive and forward-looking manner.

(Jonathan Kandell, July 28, 2021).

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References

Amanda, O. M.,& Matt M. (2008). Morgan Stanley. Retrieved from

https://www.history.com/topics/19th-century/john-pierpont-morgan.pdf

Daniel Jonas (2022). How Morgan Stanley (M.S.) Makes Its Money. Retrieved from

https://www.investopedia.com/articles/markets/082515.pdf

Dave Kovaleski (2022). Better Buy: JPMorgan Chase or Morgan Stanley?

https://www.fool.com/investing/2022/12/03.pdf

Forbes. (May 12, 2022). The 100 largest companies in the world by market capitalization in 2022

(in billion U.S. dollars). Retrieved from https://www.statista.com/statistics/263264/top-

companies-in-the-world-by-market-capitalization.pdf

Jonathan Kandell (July 28, 2021). With Goldman Sachs in the Rear View Mirror, Morgan

Stanley Chases Down Schwa. Retrieved from

https://www.institutionalinvestor.com/article.pdf

Lila Zuill (2007) Morgan Stanley’s MSCI Soars in Market Debut, Reuters. Retrieved from:

https://www.reuters.com/article/us-msci-ipo.pdf

Patrick Durkin (2008). Morgan Stanley CEO James Gorman is the Australian fixing Wall St

culture. Retrieved from: https://www.afr.com/work-and-careers/management/meet-

morgan-stanley-chief-james-gorman-the-global-success-youve-never-heard-of-

20180803-h13j68

Wolfgang Saxon (Feb. 8, 1982). Henry S. Morgan is dead at 81, a Member of the banking

family. Retrieved from: https://www.nytimes.com/1982/02/08/obituaries/henry-s-

morgan-is-dead-at-81-member-of-the-banking-family.html