Morgan Stanley exec sees more follow-ons

NEW YORK - The flood of follow-on stock issues in the United States will continue for several weeks but start shifting away from banks, a Morgan Stanley executive said Monday.

Last week, follow-on deals, or share issuance by already public companies, exceeded $15 billion for a second week in a row, far above the $1 billion to $2.5 billion range typical earlier in the year.

That tally includes large deals by Dow Chemical Co and carmaker Ford Motor Co in addition to a few blockbuster banking deals, such as US Bancorp's $2.5 billion deal and BB&T Corp's $1.7 billion offering, all of which had Morgan Stanley as bookrunner.

Morgan Stanley was also a bookrunner on State Street's $2 billion offering Monday.

In the next several weeks, follow-on volume will still be at a higher level, but I do think the mix is going to be less dominated by financials, Dan Simkowitz, Morgan Stanley's managing director and chairman of global capital markets, told Reuters in an interview.

A lot of our non-financial clients have seen that transactions have been getting done at many times the price of where stocks were just a few months ago, Simkowitz said.

Morgan Stanley was a lead underwriter on seven of the nine follow-on deals conducted by banks following the release of the results of the U.S. government's stress tests.

We have a leading FIG practice generally geared toward the larger banks, so we've had the ability to capitalize on our efforts, Simkowitz said of the advice Morgan Stanley has given major banks as they recapitalize.

Morgan Stanley also lead-managed last week's $1 billion deal by casino operator MGM Mirage (MGM.N).

Non-financial, cyclically oriented companies have seen how the market digested Ford and MGM, said Simkowitz. These companies that want their balance sheet to be stronger are clearly focusing on what the market can absorb.

MORE TASTE FOR RISK, MORE IPOS

Morgan Stanley has also been a lead underwriter on several of the largest initial public offerings this year, including those of pediatrics nutrition maker Mead Johnson Nutrition Co, language training software maker Rosetta Stone Inc, and satellite image maker DigitalGlobe Inc.

The string of successful IPOs shows the appetite for risk is returning to the market, Simkowitz said.

The Mead Johnson IPO clearly told you that an IPO is an asset class investors are willing to look at, and our last two deals, Rosetta and DigitalGlobe, indicated that people are willing to go further out and take a bit more risk now, Simkowitz said.

The risk-taking that we're seeing, and the reentry into equities we are seeing in the form of follow-ons bode well for a pickup in IPO volume post-Labor Day, Simkowitz said.

(Reporting by Phil Wahba, editing by Matthew Lewis and Steve Orlofsky)

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