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Morgan Stanley to buy E-Trade for $13 billion— here's what to watch now

Ivana Freitas
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Morgan Stanley to buy E-Trade for $13 billion in all-stock deal — Here's what three experts say to watch now

Morgan Stanley announced Thursday that it is buying E-Trade for $13 billion in an all-stock deal.

Here's what Morgan Stanley's CEO and three others are watching now.

James Gorman, chief executive of Morgan Stanley, shared the goal behind the acquisition.

"The rationale is that this is sort of the next step in our journey. It's got implications for the wealth management business, first and foremost. There's been a convergence of technology across all platforms and this gives us access to both the workplace direct as well as our core financial advisory which is unchanged … and then for Morgan Stanley this gives us more ballast."

Jim Cramer, CNBC host of "Mad Money," said E-Trade was left with no choice than to make this deal.

"Go back to when Schwab bought Ameritrade, people expected that the next thing that would happen would be E-Trade. And then it became a narrative where E-Trade's not doing well enough for everybody to buy, they're just not growing. I think if you're [CEO] Gorman you can consolidate, I guess some people would say fire people, but it is incredible to see a franchise like E-Trade that people didn't think was worth that much after a second look, after Ameritrade was bought, and then why does Gorman come and do that even though people were passing up on it initially? I think the answer is that Robinhood made it so that E-Trade had no choice."

Roger Altman, founder of Evercore, said this is a smart move for Morgan Stanley.

"Morgan Stanley has been leading the transformation from the wholesale side to the retail side and this takes them further in that regard … Morgan Stanley from a shareholder value point of view has been quite successful and it trades at a higher multiple and book value, for example, than Goldman Sachs which is great firm, too. So, I take my hat off to [CEO] James [Gorman]. I think this is a smart move and I think this is entirely consistent with his vision."

Dick Kovacevich, former CEO of Wells Fargo, said E-Trade had to make a deal and they received a good one.

"It reminds me a little bit of the Dean Witter deal by Morgan Stanley many decades ago, this is the 2020 version of that. … I think [Gorman] believes that an emerging wealth customer base, many of those or some of those will become full-fee brokerage customers as they increase their wealth over time. I really think E-Trade had to make some sort of a deal given the no-fee trade situation in the discount brokerage business and I think they got a really good deal."

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