E*Trade Financial lost more than 50% of its market value Monday, as investors worried about the true amount the company will have to writedown because of its subprime exposure. The company admitted Friday in an SEC filing that it would probably have to take a writedown which would exceed previous estimates (full story). The stock was further hit by analysts' downgrades and questions about the financial future of the company: "Bankruptcy risk cannot be ruled out," Citigroup analysts said. Citigroup also downgraded the stock to "sell," adding "We estimate that trying to liquidate E*Trade 's loan and ABS portfolio would result in over $5 billion of losses, more than wiping out tangible equity." E*Trade sent a letter to customers Monday, saying the company is "well capitalized by regulatory standards." CFO Jarret Lilien said the company could absorb up to a $1 billion writedown, and still be well capitalized. However, he also said the company expects the "market will get worse before it gets better." Shares of E*Trade traded down 54.7% to $3.89 in midday trading Monday.
Commentary: E*Trade's Worth Much More Than This • E*Trade Bankruptcy Can't Be Ruled Out - Citi
Stocks to watch: ETFC. Competitors: SCHW, AMTD. ETFs: FDN, HHH
Earnings call transcript: E*TRADE Financial Q3 2007