TD Ameritrade Chairman Makes Largest Insider Purchase In Two Years

From InsiderScore: The chairman of TD Ameritrade (AMTD) has made the largest purchase by any insider, at any company, in the past two years. Founder and Chairman J. Joe Ricketts bought approximately 7.3M shares at an average price of $15.59 on July 20th/21st, paying out more than $113.8M for the stock, and upping his holdings in the company to more than 120.55M shares, or about a 19.76% stake. Ricketts' last open market transaction came in November 2003, when he sold 2.7M shares at $12.38.

In June 2005, after spurning a takeover offer from E-Trade (ET), AMTD announced a deal to acquire TD Waterhouse, the U.S. brokerage business of Toronto-Dominion Bank (TD). Under the terms of agreement, TD received a 32% stake in AMTD, and the Canadian company agreed to immediately launch a tender offer to acquire an additional 7.9% stake in AMTD. TD also agreed to limit its ownership stake in AMTD to 39.9% for three years from the closing (January 24th, 2006), and 45% from years four through ten. Ricketts, meanwhile, agreed to limit his family's ownership to 29% for ten years from the closing. TD eventually completed most of the tender offer, via purchases sometimes well above the $16 price, through a trading plan, and the company currently holds a 39.5% stake in AMTD.

Ricketts founded what is now AMTD in 1971 as a local investment bank in Omaha, Nebraska. By 1975, he had launched a discount brokerage firm, and through a series of acquisitions, he eventually created an online brokerage giant, which he took public in 1997 at a split-adjusted price of $1.25 per share. Ricketts continued his acquisitive streak in the early part of this decade, taking over National Discount Brokers and Datek, among others. One son, Thomas, is currently a board member, while his other son, Peter, resigned from the board two months ago to pursue his candidacy for the U.S. Senate (he's a Republican running in Nebraska). The Ricketts family is #293 on the Forbes list of The World's Richest People, and #93 on the list of America's Richest People.

On July 14th, shares of AMTD fell to $13.30, a new 52-week low on an absolute basis, though not taking into consideration a $6.00 per share one-time dividend paid out to shareholders with the closing of the TD Waterhouse deal. Since the dividend was paid on January 25th, and based on today's price at 11:15 AM ET, the stock is down about -15%.

AMTD was able to move off its low thanks to a solid fiscal third-quarter (ended June 30th) earnings report, which also saw the company raise its fiscal 2007 guidance.

For Q3, AMTD reported earnings of $139.8M, or 23 cents per share, up from $83.6M, or 20 cents per share (the disparity in EPS is the result of dilution from the TD Waterhouse deal). Revenue rose sharply as a result of the acquisition, from $234.4M to $540.3M, though operating expenses more than tripled as well, from $97.5M to $307.3M. AMTD's top line was a few million shy of what analysts expected, but the company beat EPS forecasts by a penny. Looking forward, AMTD said it expects FY07 EPS of 99 cents to $1.21, compared to a consensus forecast of $1.20, and Q406 EPS of 87 cents to 93 cents, excluding a one-time gain, and compared to a consensus forecast of 92 cents.

"Despite a decline in investor activity in June, we realized a record quarter, thanks in part to an increase in asset-based revenues," said Joe Moglia, chief executive officer. "We continue to focus on completing the TD Waterhouse integration and positioning AMTD for growth in the long-term investor segment. Over the next year, we expect the investments we are making in our technology, value propositions, and brand to deliver results that will enhance our growth and strengthen our market position going into 2008."

Following AMTD's earnings report, Howard Chen, an analyst with CSFB, said that he believes AMTD will have "significant earnings power" once the Waterhouse integration is completed, although the short-term outlook for the stock "remains choppy."

Worth Noting: Ricketts' purchase trumps the $70M open market buy transacted by Dell (DELL) Founder and Chairman Michael Dell in May, and is now the largest open market purchase by an insider, excluding institutional owners, in the past two years. Additionally, over the past year, only Aubrey McClendon, the CEO of Chesapeake Energy (CHK), has laid out more cash ($159M) for shares of his own company.