E*Trade: Expect a Takeover Any Day Now 31 comments
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E*TRADE Financial (ETFC) stock price is now in the $1.70 range after trading at $2.08 this week. The price drop may very well be a shake out to accumulate shares as a takeover could be in the works. ETFC had many analyst upgrades; last week with big dog Goldman Sachs raised its rating on the stock to buy with a $2.30 target and said the firm is putting its credit problems in the rearview mirror as trading revs up.
GS analysts last Friday suggested clients buy ETFC shares after the company reported strong client trading during August.
GS said that, despite expected rising credit losses at ETFC, which it sees increasing to up to $1.6 billion, it expects improving trends in the firm's home-equity-loan book and says the worst provisioning appears to be over for its mortgage and home-equity loans.
ETFC is now a buy say the top analysts, so if you're selling under $2 and not buying you will miss out. I believe the upside is over 100% regardless of a takeover. ETFC current stock price doesn't reflect the 3 analysts upgrades last week. In my opinion, investors have a chance to buy shares cheap at the current range.
Analysts believe a takeover is more than likely to happen. Citigroup's Keith Walsh noted last week that ETFC's main brokerage business remains healthy, with stronger growth in customer accounts than TD Ameritrade (AMTD) and Charles Schwab (SCHW). As ETFC mortgage portfolio stabilizes, the company may be acquired by one of these rivals, Walsh said.
"Competitors AMTD and SCHW have both made public comments about the attractiveness of E-Trade's 2.7 million brokerage accounts." The analyst upgraded ETFC to buy from hold and raised the price target from $1.50 to $2.30.
ETFC is gaining brokerage accounts faster than any other brokerage out there with a 138 percent increase in year-over-year new accounts. SCHW and AMTD need to hurry up and grab ETFC before this is back above $5, and I bet it will be come this time next year with its mortgage loan portfolio now stable.
ETFC sold 80.2 million shares in a so-called "at the market," or ATM, offering. This method of raising capital allows a company to sell new shares at the prices prevailing in the open market, as opposed to a secondary offering, in which the company sells stock to a group of institutional investors at an agreed-upon price, usually a discount to where the stock is trading. The New York-based online brokerage said the offering had gross proceeds of $150 million. Sandler O'Neill & Partners acted as the sole distribution agent for the offering.The average price was $1.87 a share.
Shorts will take a massive risk holding short over night. Any morning ETFC could get an offer from $3 to $4 a share or maybe more. ETFC is a now a turn around play. ETFC is well below fair value of $2.70 a share based on book value.
ETFC board of directors scrapped a Stockholder Rights Plan that was essentially a "poison pill" set up in 2001 to prevent a hostile takeover of the company.
"The Rights Plan elimination improves corporate governance, while also increasing the likelihood of the company's eventual acquisition," said Matthew Albrecht, a financials analyst at Standard & Poor's Equity Research.
Think about it? Goldman Sachs suggesting clients BUY ETFC, I bet this will soon be above the $2.30 target. Good luck and don't be tricked into selling.
Disclosure: Long ETFC, GS, AMTD
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This article has 31 comments:
AND, it seems that the Executive VP of E-Trade, after having sold 120,000 shares on 9/21/09, thinks the chances are slim too.
xml.10kwizard.com/fili...
And, yes, they represent only 9% of his holdings, but IF a deal was in the offing would you sell ANY???
Mr. Stupid
On Sep 25 08:22 AM Vaun wrote:
> Schwab flat out said they had no interest a month or two ago...
Mr. Stupid
On Sep 25 09:59 AM James T. Kirk wrote:
> This article is full of more "hope and change" than the speeches
> of Zero, the current resident of 1600 Pennsylvania Ave.
>
> AND, it seems that the Executive VP of E-Trade, after having sold
> 120,000 shares on 9/21/09, thinks the chances are slim too.
>
> xml.10kwizard.com/fili...;ipage=6525493
>
>
> And, yes, they represent only 9% of his holdings, but IF a deal was
> in the offing would you sell ANY???
That's much, much higher than their all-time high. Yes, the $25 per share high. That old high was with approximately 400M shares and was only 10B. So you think E*trade should be worth more now than before their mortgage debacle? Heck, that market cap is nearly as big as Schwab itself.
C'mon, really...factor the dilution to your math. There are so many day traders and bottom fishers who cannot get past the sub $2 share price (thinking it's dirt cheap) when it's really not.
Dilution kills.
On Sep 25 09:22 AM casey00001 wrote:
> I was on Etrade before switching to Scottrade. Etrade's customer
> service was lousy and it took them forever to record deposits and
> clear deposits. Schwab, TD Ameritrade and Scottrade may just let
> them self destruct and then go after the clients.
As for their mortgage business, the worse is probably over but what a sad state of affairs. Really the managemenrt should be investigated for gross negligence.
On Sep 25 09:59 AM James T. Kirk wrote:
> This article is full of more "hope and change" than the speeches
> of Zero, the current resident of 1600 Pennsylvania Ave.
>
> AND, it seems that the Executive VP of E-Trade, after having sold
> 120,000 shares on 9/21/09, thinks the chances are slim too.
>
> xml.10kwizard.com/fili...;ipage=6525493
>
>
> And, yes, they represent only 9% of his holdings, but IF a deal was
> in the offing would you sell ANY???
20.39. 300 shares were filled and I decided to cancel the remainder.
The next day, the stock gapped up 2 points and at around 10:30 that morning, my "platinum team" account officer called me and stated the following: "The trading room called me and said that you have an execution from yesterday due on CSIG for 200 shares at 20.39. Do you want the execution?" They offered to trade my shares at a 8% discount to the market. Such altruism!
Now, one wonders if this is just a rogue action out of the "trading room", or indicative of a wider desperation at the company to pull profits out of any target possible. I am inclined to think that latter.
Any thoughts?
I give Ameritrade very low marks and I pray they don't acquire Etrade.
There is no comparison between Etrade and Ameritrade.
Finally, for those who bash Etrade's customer service, I have talked with customer service reps there probably over 200 times in the past 6 years. I have had 2 bad experiences. That's 2 out of 200.
Also, I have an account service representative that is knowledgeable, courteous and extremely responsive in addressing my requests. I could not be more satisfied.
I dread the thought that Etrade my be acquired and folded into somebody else's inferior platform. The good news, I think, is that management realizes they have a growing and valuable asset, so nobody is going to steal this company on the cheap. I currently maintain a significant position in their shares because any buyout would have to be at a sizable premium to have any chance of being accepted.
On Sep 26 11:07 AM Mike Rabe wrote:
> Etrade has by far the best trading platform. I have accounts in both
> Etrade and Ameritrade.
>
> I give Ameritrade very low marks and I pray they don't acquire Etrade.
>
>
> There is no comparison between Etrade and Ameritrade.
>
> Finally, for those who bash Etrade's customer service, I have talked
> with customer service reps there probably over 200 times in the past
> 6 years. I have had 2 bad experiences. That's 2 out of 200.
I transferred to E trade from Schwab in 2004 . Schwab's fill were horrible ! With E trade , my limit orders are often filled at even better prices .I 've only had one somewhat negative experience in dealing with customer service since 2004 . It was on a day when " my rep " was off . The VP just posted about a week ago , " that he was retiring year-end . Could this be the reason he is selling some shares in the firm ? I love their trading platform .
Mr. Stupid
On Sep 25 09:59 AM James T. Kirk wrote:
> This article is full of more "hope and change" than the speeches
> of Zero, the current resident of 1600 Pennsylvania Ave.
>
> AND, it seems that the Executive VP of E-Trade, after having sold
> 120,000 shares on 9/21/09, thinks the chances are slim too.
>
> xml.10kwizard.com/fili...;ipage=6525493
>
>
> And, yes, they represent only 9% of his holdings, but IF a deal was
> in the offing would you sell ANY???
I was a customer and not very satisfied(promises of trades not kept to lure you in)
I can positively assure you all that IB is far and away the best broker for price/fill/platform/data support overall performance. The others don't even come close. E trade vs IB is like a going from a volkswagen to a cadillac. Simple as that.You would all benefit greatly.
Take ETrade private, merge with good company, and getting rid of management without giving them a penny.
This article purely make-believe, suggest that E-trade is expecting an offer any day now. What a joke! So obviously posted in hopes of helping the long inertia of this stock.
His bio has all sorts of colorful claims but no specifics. How does this guy get published? I think Seeking Alpha posts these articles in conjunction with their agenda /positions, or positions of influential "friends". Who cares if their real, true, or just made up?
Seeking Alpha and bloggers like Jeredmy Richards make the National Enquirer look accurate and credible.