Morgan Stanley demanded £1bn in cash from Frazier after a “personal intuitive objection” to Mike Ashley from the bank's most senior dealer. , the High Court heard.
Simon Smith, joint global head of investment banking, allegedly turned down Mr. Ashley's attempt to open a master brokerage account out of “dislike” towards him. Such a relationship with Morgan Stanley would give Frazier access to the full range of financial instruments used by institutions and hedge funds to play the markets.
In an email to subordinates in March 2021, Mr. Smith, then Head of Europe, wrote: “Guys, it's getting to me that we're talking to Mike Ashley's team and it's getting more and more real. To be honest, I don't like it… It will take me a very long time to convince me.”
Documents submitted to the court by Morgan Stanley describe Smith's reaction as “intuitive.” There is no suggestion that his opinion was illegal.
When Morgan Stanley discovered two months later that Frasers was using its stock trading services “through the back door,” it sparked a series of concerned phone calls between bankers about the “franchising risk” of doing business with Mr. Ashley, the documents show.
They called him an “active” investor whose campaigns to influence his goals could threaten the bank's relationships with other corporate clients. The documents provide “very clear direction from our CEO [James Gorman] regarding this type of business and our inability to support it.”
In one transcript, Dominic Freemantle, a senior equity banker, told his colleague Chris Cheverallu: “[Investment Banking] has dealt with [Mr Ashley] in the past and they think that … he did not behave in a way that he was trustworthy. . These are the words they throw around.”
Mr. Cheverall subsequently told another colleague: “We just don't like the ultimate beneficial owner behind this. We just don't like him.”
A spokesman for Morgan Stanley said, “Fraser has never been a Morgan Stanley customer. This claim is far-fetched and unfounded, and we will vigorously defend it.”
Frasers, a frequent High Court plaintiff, is filing a damages suit against Morgan Stanley, which he believes will expose what he believes machinations of the investment banking establishment.
At a hearing last month, Morgan Stanley agreed to add Mr. Smith to a list of individuals whose reports will be checked for evidence before a trial next year.
The bank denies any wrongdoing in what it calls ” bogus” lawsuit from a company with which he never had a direct contractual relationship. He told the court that he had every right to decide whether to accept the client.
“In the circumstances where one division of Morgan Stanley turned down Fraser as a client, it is not surprising that another division refused to take an inconsistent stance,” Morgan Stanley told the High Court.
It's up to Fraser. claims that the margin call was illegal because it was “arbitrary, irrational, capricious and/or contrary to good faith and/or market practice.” According to Fraser, the £1 billion sum was “not commensurate with any risk Morgan Stanley was exposed to.”
After being denied a brokerage account, the retailer turned to the much smaller Danish institution Saxo Bank to help him acquire a stake in German fashion house Hugo Boss.
One of Mr. Ashley in the stock market. Given what he saw as an undervalued goal, the investment in Boss was also intended to improve Frasers' relationship with important supplier to its chains, House of Fraser and Flannels.
A margin call – a requirement to provide cash within hours to cover the risk of an adverse share price movement – was calculated and imposed on Saxo and passed to Frasers after Morgan Stanley applied a stress test suggesting a 400% move in Boss shares.
The Wall Street giant claims he didn't know Mr. Ashley was a Saxo client when he forced the margin call amid growing concerns about market risk.
However, Frasers claims that Mr. Smith's opinion of Mr. Ashley played a significant role in Morgan Stanley's “irrational” refusal to accept attempts to pledge shares or other collateral.
The Frasers exercised options to increase their stake and offered to pledge their actual stakes in Boss. When this offer was rejected, Mr Ashley offered his entire £1.9 billion stake in Frasers, plus £100 million in cash as collateral, which was also rejected. he argues that this would destabilize the entire Fraser empire due to speculation about its finances.
The retailer told the High Court that this constituted “an inappropriate attempt to force Frasers to liquidate their positions and/or transfer options to Morgan Stanley.”
In the process of disclosure, he is trying to find out if Morgan Stanley could really extract any benefit from such transactions. He denies that he acted as an activist against Boss.
The Bank told the court that his bail decisions were rational and partly due to Frazier's insistence that he make unacceptable commitments.< /p>
The documents show that while negotiations with the Frasers and Saxo remained open, Morgan Stanley decided it would not accept any form of bail and wanted the Boss position removed from its books. one internal call as “goalposts moving” meant that a “very quiet informal conversation” with Saxo would be required to explain.
Mr. … if we are going to talk to them about this, it should be a quiet conversation.” /p>
Later that day, Mr. Sheverall told a colleague that he had been warned not to say anything bad about Frazier. “These people don't hesitate to take legal action,” he said.
This case has taken on new significance as Frasers ramps up its investments in other retail companies.
in the past few weeks, he has appeared on the shareholder registers of Boohoo, AO World, Currys and Next, and has increased his stake in Asos. After parting ways with Saxo and Morgan Stanley, Mr. Ashley was able to negotiate a master brokerage account with HSBC, which he now uses to confuse retail analysts about his goals.
Mr. Ashley was able to communicate Boss options with “significant commercial and reputational damage” that a margin call risks. However, Frasers has claimed over £45 million in damages due to crisis restrictions on its share trading.
The case continues.
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