James Gorman, chief executive officer of Morgan Stanley, purchased $2.06 million of stock in the firm as the shares touched their lowest level since March 2009.
Gorman bought 100,000 shares today at a weighted average price of $20.62, according to a filing with the U.S. Securities and Exchange Commission. The stock tumbled $1.32 on the New York Stock Exchange, or 6.3 percent, giving Gorman a $92,000 one-day loss on the transaction.
The purchase, which was larger than his cash bonus for 2010, increased Gorman’s holdings to 955,370 shares, worth about $18.8 million at today’s closing price of $19.70. It was Gorman’s first outright purchase since he became CEO of the New York-based firm at the start of 2010.
Morgan Stanley fell 28 percent this year, making its shares worth 35 percent less than book value. The bank’s puts were the most active in the U.S. equity-options market yesterday after an investor bought a block of contracts with a strike price 25 percent below the previous day’s closing level.
Morgan Stanley shares dropped to $19.70 at 4:15 p.m. in New York Stock Exchange composite trading, the lowest level since March 9, 2009.
Gorman said in May that the market was assuming worst-case scenarios for financial companies, which may get a boost if a notable value investor were to step in and take a large position. Gorman said in an internal memo in December that the stock, then trading at $26.86, was “meaningfully undervalued.”
Gorman’s net worth has dropped with Morgan Stanley’s plunge this year as the firm tries to raise its market share in fixed-income trading and increase profitability at the retail brokerage. His shareholdings were worth about $26.2 million when he received his annual stock award in January. That figure had dropped to about $18 million yesterday. Gorman also holds more than 800,000 options, all of which are more than 30 percent out of the money.
The stock jumped 11 percent on July 21 after Morgan Stanley reported a smaller loss than analysts estimated on higher trading revenue. It has dropped 19 percent since then, as financial companies in the Standard & Poor’s 500 Index retreated amid concern the U.S. recovery is weakening and the European sovereign-debt crisis will spread.
A trader yesterday purchased 34,532 October puts to sell Morgan Stanley shares at $16, according to data compiled by Bloomberg. It was the biggest trade in Morgan Stanley’s puts since January 2010, according to Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market data and analytics.