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TAG | E*Trade Financial Corporation

Nov/11

18

E*Trade Value Falls Most in S&P 500 After Rejecting Sale of Company

Comments off · Posted by Securities Lawyer in FINRA

In a Bloomberg article from Nov. 11, 2011 they write that E*Trade Financial Corp., the fourth- largest U.S. online brokerage by client assets, dropped the most in the Standard & Poor’s 500 Index after the board rejected putting the company up for sale.

It was reported that E*Trade declined 3.6 percent to $9.14 at 11:58 a.m. New York time on Nov. 11th. Before then, the shares dropped 41 percent in 2011, more than its bigger rivals Charles Schwab Corp. and TD Ameritrade Holding Corp.

“A strong desire to sell was never present at E*Trade and if any offers were in fact on thetable, they were not compelling enough to change that fact,” Patrick O’Shaughnessy, a Chicago-based analyst at Raymond James & Associates Inc., said in a report today. “In our view, the pool of potential buyers is and always has been relatively small.”

The brokerage hired Morgan Stanley in July to explore a sale and then replaced the bank with Goldman Sachs Group Inc. E*Trade, based in New York, initiated the review following a request by Citadel LLC, its biggest shareholder, to address “catastrophic losses” that have driven the shares down 96 percent since 2007. Citadel injected $2.55 billion in cash into E*Trade that year to help the company survive mortgage losses.

The board concluded that “the continued execution of the company’s business plan is currently the best alternative for increasing stockholder value,” E*Trade said in a statement Nov. 9th.

No Meeting

Devon Spurgeon, a spokeswoman for Citadel, declined to comment on E*Trade’s announcement. Ken Griffin’s Chicago-based hedge fund asked E*Trade on July 20 to arrange a meeting for shareholders to vote on items such as hiring an investment bank and removing two directors. E*Trade, which fired Morgan Stanley in August after Citadel challenged the hiring process, rejected hosting a meeting, and instead began the strategic review.

The company has posted more than $3 billion of losses related to bad mortgages following the collapse of the subprime market. Griffin joined the board in June 2009, two years after Citadel invested in the online brokerage. The hedge fund cut its stake to less than 10 percent this year.

E*Trade is “basically saying they haven’t been able to reach an agreement with a peer,” Sachin Shah, a Jersey City, New Jersey-based merger arbitrage strategist at Tullett Prebon Plc, said in a telephone interview yesterday. “Now the question is: What is Citadel going to do?”

The article says that Charles Schwab and TD Ameritrade were the most likely buyers, Raymond James and Sandler O’Neill & Partners LP said in July. Acquiring E*Trade would require a buyer to take on the company’s “legacy loan portfolio,” which should be valued about $1.3 billion less than than the figure on E*Trade’s financial statements, O’Shaughnessy said today.

‘Significant Writedown’

“This would necessitate a significant writedown, potentially leading to a corresponding need to raise capital, which could in turn severely dampen the price any potential buyer would be willing to pay,” he wrote today.

Charles Schwab Chief Executive Officer Walt Bettinger said on Oct. 26 that he wasn’t willing to buy corporations with “balance sheet challenges,” without naming any companies.

Bloomberg reports that in the online brokerage business, E*Trade has been reporting growth. The company’s revenue-generating trades climbed to 164,715 per day on average last quarter, up 11 percent from the previous three months and 30 percent higher than a year ago. E*Trade added $2.1 billion in net new client assets in the quarter ending Sept. 30, an increase from both the second quarter’s $1.1 billion and the third quarter of 2010, when $700 million in client assets were added.

“They’re continuing with their fundamental game plan and it’s difficult to find a buyer,” Brian Bedell, a New York-based analyst with ISI Group Inc., said in a telephone interview yesterday. “The best thing for E*Trade is to continue to execute its plan, largely because the company continues to show reasonably good growth metrics.”

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with an online brokerage, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Sep/11

14

E*Trade Gets Wells Notice For Auction-Rate Securities

Comments off · Posted by Securities Lawyer in FINRA

NEW YORK - In an article from FoxBusiness.com, Brett Philbin writes that  E*Trade Financial Corp. (ETFC)  received a Wells notice from the Financial Industry Regulatory Authority related to the purchase of auction-rate securities by customers of one of its subsidiaries, according to a regulatory filing.  A Wells notice indicates that regulators are recommending enforcement action and gives the company a chance to respond.

Auction-rate securities are long-term debt instruments with attributes of short-term securities because they were resold with new interest rates in periodic auctions. Investors eventually found themselves stuck with the securities after the market froze.

The article states that in its annual report filed with the Securities and Exchange Commission (SEC), the New York online brokerage said its E*Trade Securities, LLC, unit received the notice Feb. 9. E*Trade is the latest online brokerage to face pressure from regulators to make investors whole following the breakdown of the ARS market in 2008.

Philbin writes that last spring, rival TD Ameritrade Holding Corp. (AMTD) agreed to repurchase $305 million in auction-rate securities from clients, while Charles Schwab Corp. (SCHW) received a Wells notice of its own from the SEC as well as a civil complaint from the New York Attorney General in 2009. Schwab filed a motion to dismiss the AG’s case and told Finra it believes the enforcement charges are unwarranted.

 The FoxBusiness article said that in the filing, E*Trade said it is “cooperating with these inquiries and will submit a Wells response to Finra setting forth the bases for E*TRADE Securities’ belief that disciplinary action is not warranted.” The company said the total amount of auction-rate securities held by its customers was $138.2 million as of Dec. 31, 2010.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of  auction-rate securities losses through E*Trade Financial Corporation, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

 

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