What’s the biggest check ever made?

Posted on

splits: 24

What was the biggest check you’ve ever written? The biggest check most people will ever write is probably a few thousand dollars to cover first / last month rent and a security deposit on an apartment. Any larger amount, such as a down payment for a home, is usually sent electronically.

The same goes for the business world. A company will scrap checks for employee salaries and perhaps some smaller deals, but for larger transactions, an electronic transfer is by far the preferred method.

On the other hand, some very large checks have certainly been made out in the course of modern financial history, ranging from millions to hundreds of millions of dollars. So what’s the biggest physical check ever made? To find out, we have to go back in time …

October 2008

It’s October 2008. The world is staggering in an out of control financial crisis. The entire world economy was in free fall. Banks that, weeks before, were considered the most reliable and steadfast institutions in the corporate world were on the verge of bankruptcy. Lehman Brothers had just failed and Bear Stearns was bought for pennies on the dollar.

And then there was Morgan Stanley.

According to all reports, Morgan Stanley was the next to go down. To prevent its demise, Morgan Stanley executives reached out to several large overseas companies to find a lifeline that would support the bank’s finances and show investors that the bank would survive.

Morgan Stanley flirted with a state-controlled Chinese bank for a while but eventually found a potential match with Mitsubishi UFJ.

The problem was urgency. Investor confidence had decimated Morgan Stanley’s share price from nearly $ 60 to less than $ 10, and there was no end to the pain in sight.

“It’s a shame you can’t just write a check!”

Teams from both companies held an emergency meeting on Columbus Day weekend in October 2008. After 48 hours of consecutive negotiations, the two sides had negotiated a deal and a final price. Mitsubishi would invest $ 9 billion in Morgan Stanley in exchange for a 21% stake and an annual dividend of 10%.

Under all other circumstances in recent financial history, a $ 9 billion transaction would be made through an electronic transfer from one bank to another.

This is where the negotiating teams hit a wall.

#1) First of all, it was a bank holiday weekend and banks in both countries would be closed until Tuesday.

# 2) Second, transferring an amount typically takes 2-3 days and Morgan Stanley may not have survived an additional 24 hours.

# 3) Third, Morgan Stanley wanted to officially announce the merger as soon as possible in order to prevent another price fall.

Desperate for a solution to the $ 9 billion problem, one of the Morgan Stanley dealmakers joked:It’s a shame you can’t just write a check!

Both teams burst out laughing. But then, a few minutes later, one of Morgan Stanley’s top executives made the amazing realization that a check could actually work.

If Mitsubishi had the funds to cover a check for $ 9 billion, there was no reason Morgan Stanley couldn’t take it and deposit it before markets opened Tuesday morning. From an accounting / regulatory perspective, a paper check “checked” all of the boxes that allowed Morgan Stanley to officially announce the merger and, hopefully, reverse the deteriorating stock price.

The Japanese team quickly left to call the home office and research their skills. As luck would have it, Mitsubishi UFJ actually retained enough account balance to settle and settle a check for $ 9 billion.

After a few hours of phone calls and agreements, the Mitsubishi bankers returned to Morgan Stanley’s headquarters with a check for $ 9 billion. That’s the number nine followed by nine zeros. Eleven zeros if you count the pennies. It was and is the largest check ever written.

Here is a photo of the actual exam:

Morgan Stanley immediately announced to the world that they had a deal closed.

On Tuesday, its stock rose 85% from $ 9.68 to $ 17.92. Morgan Stanley’s stock price is above $ 100 today. The company’s market capitalization is $ 190 billion. So investing $ 9 billion in a 21% stake turned into $ 40 billion excluding dividends!

All thanks to a paper check.

Leave a Reply

Your email address will not be published. Required fields are marked *