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Morgan Stanley Closes the E-Trade Acquisition

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On Oct. 2, Morgan Stanley announced the completion of its acquisition of E-Trade, which is an online trading platform. Morgan Stanley announced the acquisition in February. The merger will give Morgan Stanley a larger scale in the wealth management business. The merger fits into Morgan Stanley's strategy of shifting to a balance sheet light business mix with recurring revenue streams.  

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Did Morgan Stanley buy E-Trade?

On Oct. 2, Morgan Stanley announced that it completed the acquisition of E-Trade Financial Corporation. In February, Morgan Stanley announced that it would acquire E-Trade in an all-stock transaction worth $13 billion. The deal received approval from Federal Reserve last week. 

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According to the terms of the agreement, E-Trade shareholders will receive 1.0432 Morgan Stanley shares for each E-Trade share held. Morgan Stanley’s chairman and CEO, James Gorman, said, “The addition of E*TRADE positions us as an industry leader in Wealth Management across all channels and segments, and significantly increases the scale and breadth of our Wealth Management franchise, which now oversees $3.3 trillion in assets.”

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E-Trade is an electronic trading platform that trades financial assets like stocks, futures contracts, ETFs, mutual funds, options, and fixed-income investments. Morgan Stanley is a leading global financial services firm that provides investment banking, wealth management, and investment management services. 

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E-Trade and Morgan Stanley merger details

The deal between Morgan Stanley and E-Trade will increase Morgan Stanley's wealth management franchise to $3.3 trillion assets. E-Trade will continue to provide commission-free trades under its own brand name. E-Trade has been one of the beneficiaries of the COVID economy. Amid stay-at-home orders, people have opened new brokerage accounts to trade securities. E-Trade has added 327,000 retail accounts in the second quarter.

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The deal is accretive because the combination will increase the scale of the wealth management business, expand the product and services gap, and enhance digital capabilities. The deal will result in cost and funding synergies. Also, the deal is in line with Morgan Stanley’s aim to move towards a balance sheet light business mix and a more stable and recurring revenue stream. 

Moody’s upgraded Morgan Stanley’s short-term and long-term ratings after the completion of the E-Trade acquisition. Moody's thinks that the acquisition is a clear step by Morgan Stanley towards its strategy to shift to more recurring and profitable revenue streams.

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What are Morgan Stanley's and E-Trade's stock prices today?

On Oct. 2, when the companies announced the deal completion, E-Trade stock rose by 1.6 percent and Morgan Stanley stock rose by 1.5 percent. While the deal was announced back in February, regulatory approval and the final completion of the merger generated positive sentiment among investors.

In pre-market trading at 8:00 a.m. ET on Tuesday, Oct. 6, Morgan Stanley stock was trading up by 0.41 percent at $48.8. E-Trade stock has stopped trading on a standalone basis since it's part of Morgan Stanley.

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