MBIA Shares Popped Then Gave It Back: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of bond insurer MBIA (NYSE: MBI  ) popped this morning by 11%, but have given it all back and are sitting slightly in the red as of this writing, after it settled an ongoing suit with Morgan Stanley (NYSE: MS  ) .

So what: Morgan Stanley issued a press release announcing that the settlement terminates the outstanding credit default swap protection that MBIA had purchased on commercial mortgage-backed securities. The resolution will result in a net cash payment to Morgan Stanley, while the financial giant will recognize a pre-tax loss of roughly $1.8 billion.

Now what: Putting the lawsuit behind both companies will remove some uncertainty for investors, even though MBIA shareholders might not be too thrilled at having to pay $1.1 billion. The settlement resolves the claims at around 10% of face value, which is fairly reasonable. From Morgan Stanley's perspective, it will free up capital that the company can use to reinvest in its client-focused businesses.

Interested in more info on MBIA? Add it to your watchlist by clicking here.

Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Related Tickers

12/19/2014 4:08 PM
MBI $9.30 Down -0.02 -0.21%
MBIA, Inc. CAPS Rating: **
MS $38.51 Up +0.41 +1.08%
Morgan Stanley CAPS Rating: ***

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