And Credit Suisse First Boston is thought to have lost several million euros last Friday on a Eu472m bought deal in STMicroelectronics stock for France Telecom.
For rival equity bankers, both deals were symptomatic of the jumpy competitiveness in the market, as banks jostle to maximise their year-end league table standing.
Morgan Stanley's TeliaSonera deal pushed it to the top of the European equity capital markets league tables, with just one week of major business to go.
The Finnish government reduced its stake in the Swedish-Finnish telecom company by 5.3% to 13.8% by auctioning the shares to banks on Tuesday.
Morgan Stanley and its co-lead manager, Enskilda Securities, won the auction on Tuesday night and guaranteed the government Skr40.25 a share.
But on Wednesday morning, just as they were beginning to sell the block, TeliaSonera announced that it was writing off its International Carrier unit to the tune of Skr3.4bn (Eu378m). The shares tumbled.
After a bruising day on the stock market, Morgan Stanley priced the 250m shares at Skr39.30, locking in a basic loss for the trade of Skr237.5m.
Morgan Stanley's loss was probably partly offset by fees paid by the government, but the deal is a sour end to a competent year in the European equity capital markets for the bank.
?Morgan Stanley bid substantially more than other banks at the auction,? said one banker. ?They knew it would have a negative P&L impact but thought it worthwhile in order to end the year at number one ? ahead of Goldman Sachs. They just didn't reckon on it being this much of a P&L hit.?
The two banks offered a backstop price of Skr40.25, based on the fundamental attributes of the stock and its trading performance in the previous month. On Tuesday evening the stock had closed at Skr40.90. But on Wednesday morning, things started to go wrong for them.
International write-off
TeliaSonera announced that it would write off the Skr3.4bn (Eu378m) value of its International Carrier unit in order to conform to International Financial Reporting Standards.
TeliaSonera International Carrier was set up to try to turn the company into a global player. It operates an internet protocol network in northern and eastern Europe, built at enormous cost during the telecom boom years.
Continual falls in the price of bandwidth and other telecoms products made it inevitable that TeliaSonera would be forced to take a write-down ? it was just a question of when.
However, the market had not priced in the write-down so thoroughly that TeliaSonera's stock could avoid a beating when it was announced. The hit, which will appear in the company's fourth quarter earnings, tipped the share price into a steep fall ? it lost 3.9% on Wednesday.
Knowing the likely impact of the announcement, Morgan Stanley and Enskilda set a price range on Wednesday morning of Eu39.95-Skr40.50 ? so that much of the range was below the backstop price.
But as the share price fell, it quickly became evident that even that range would not be achievable.
?Clearly, some investors were uncomfortable with the situation,? said a syndicate banker at Morgan Stanley in London.
Management fails to impress
As if to compound the problems Morgan Stanley and Enskilda were facing, the company then hosted a conference call to discuss the write-down.
Although the Morgan Stanley banker would not comment on the call, rival syndicate bankers said investors had told them they felt TeliaSonera's management had been lacklustre in its presentation and explanation of the write-down.
A further hurdle for the deal was the prospective overhang on the stock.
The Swedish government hastily put out a statement on Wednesday morning that it had no plans to sell any of its 45% stake ? acquired two years ago when the former telecom monopolies of Sweden (Telia) and Finland (Sonera) merged.
Similarly, the Finnish government released a statement indicating that it was bound by a 180 day lock-up that could only be waived with the consent of Morgan Stanley ? as is usual. What was unusual was that this statement had not been in the original release detailing the sale.
That announcement indicated that up to 300m shares could be sold in the deal. In the event, only 250m shares were sold.
VimpelCom damage
As if these problems were not enough for the banks to contend with, the Russian mobile phone operator VimpelCom announced on Wednesday morning that the Russian tax authorities had served it with a R4.4bn ($157m) tax bill dating from 2001.
The move caused consternation among investors in Russia and the Russian market fell sharply, with telecom companies particularly affected. VimpelCom's American Depositary Receipts fell more than 20%.
For many observers, the government action suggested that the Russian business environment is becoming increasingly unorthodox in the wake of the much larger tax demands on oil giant Yukos, which has been driven to the verge of bankruptcy.
The VimpelCom tax bill also sparked concerns that the government may be planning to move on other leading Russian companies.
The news hurt TeliaSonera because it owns 42.8% of Megafon, the third largest ? and fast growing ? mobile operator in Russia.
Another link with VimpelCom is that Mikhail Fridman, the chairman of Alfa Bank, is a leading shareholder in VimpelCom and owns 25% of Megafon. He bought that stake in August 2003, much to the annoyance of other shareholders.
For many investors considering TeliaSonera, the news about VimpelCom was too close for comfort. ?People who didn't know the ins and outs of the stock were understandably concerned,? said the Morgan Stanley banker.
Finland just lucky
The result of this bombardment of negative news was that Morgan Stanley and Enskilda had to take a loss on the deal. The 250m shares were sold at Skr39.30 ? flat to the market close on Wednesday. Yesterday (Thursday) the stock fell another 2.04%, to close at Skr34.80.
Inevitably, market participants have wondered whether the Finnish government was just lucky in its timing or whether, as a major shareholder in TeliaSonera, it might have been expecting the news about International Carrier being written off.
Samuli Haapasalo, a spokesman for the government in Helsinki, told EuroWeek it had no prior knowledge of the announcement.
?We are not an insider in the company in terms of operational issues,? he said. ?We have very strict corporate governance guidelines and are following them fully.?
Haapasalo also denied suggestions from some market observers that the government had prior knowledge of the tax audit about to be served on VimpelCom.
He said the Finnish government had long made its intentions regarding its stake in TeliaSonera known to the market ? although he did not comment on the absence of a 180 day lock-up in the original announcement of the sale.
?Parliament has given the government full authorisation for the sale of the entire stake,? he said. ?We have made clear our intention to diminish our shareholding over time, and subject to market conditions, but there is no planned programme of share sales.?
