E*Trade's Annual Shareholder Meeting Should Pressure the Shorts 24 comments
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On April 25, Dean Laster wrote an intriguing article regarding the fact that E*Trade’s (ETFC) stock has short interest sitting at 20% of the stock’s float (see “Why the E*Trade Shorts Have It Wrong”). Mr. Laster pointed out that E*Trade has no “downside catalyst” and that all the the bad news is priced into the $4 existing stock price. In fact E*Trade’s April 17th Earnings Conference Call presented many positive upside trends for both the brokerage business and the mortgage portfolio performance, so “shorts are in effect digging their own graves.”
This week, on Wednesday May 7, Nick Perry from Schaeffer’s Investment Research wrote an article entitled “Is E-Trade Financial Corp. Poised to Make Another Run?” In this article Mr. Perry affirms the unusual circumstances that the 20% short interest position sets up. He also indicates that the current “contraction in volatility can be a sign that ‘pressure’ is building.” He points out that “a contraction doesn’t suggest which way a stock will break.” However, the “stage” is set for a “pop above the front-month calls but we still need a catalyst to spark the buying.”
What Mr. Perry doesn’t realize is that the catalyst is now here. This coming week, the Annual Shareholder’s Meeting will be held by E*Trade. Will this meeting provide the “Short Interest” holders with their negative price effect? The pressure is there, which way will E*Trade break this coming week, up or down?
Other points of interest are as follows:
1) A concern in April was that stock market and brokerage trading volume would decline because of recessionary trends, which would hamper E*Trade’s brokerage recovery. Since that time the DOW Jones Industrial Average surpassed 13,100 and many economic employment and production indicators have provided signs of positive economic trends.
2) On April 22, 2008, Kanner Frederick Wilkinson, a Director at E*Trade purchased 50,000 shares of stock. Also, Donald H. Layton, CEO, has his compensation/bonus package directly linked to stock value.
3) On January 29, 2008, nine E*Trade directors directly purchased significant blocks of E*Trade stock totaling close to $2 million.
Disclosure: Long
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1. April Metrics announcement, which should be very good given the volume during the month, and
2. CFO announcement, which is rumored to be very good.
These catalysts could support a nice move prior to the shareholders meeting, and assuming they pump up the shareholders at that meeting, the following week could be very nice indeed for the longs.
suspecting both Layton and Ken Griffin are executing a script
in which they will keep stock price close to $4 and then convert
all debt to equity at $5 range -- essentially stealing this company
for nothing while we all know that this company should be worth
a lot more. This may be one of the reasons the shorts are not worried about having to cover -- because they are going to get
stock to cover the short in a "debt for equity" swap.
Bunch of crooks if you ask me. I am super long and a loyal customer
and I HOPE I AM PROVEN WRONG. And my reason for posting this
is so the MANAGEMENT AND CITADEL know that we are watching
for any shenanigans.
- Quasi
Transferred the one account to Scottrade. Same old same old. Not a dimes worth of difference.
Telephone talk time averaged 1/2 hour to 1 hour. These people are not trained properly. Wrong information a lot of the time. Quotes are wrong. Updates way behind the curve.
Check the stock MO on their site. Look at the dividend it pays. Waayyyyy behind the curve.
join fellow "retail" investors at ETradeInvestors group at yahoogroups.
finance.groups.yahoo.c.../
- Quasi
Well,Cindy,today they announced they were exiting the mortgage origination business. Could that be a downside catalyst or is another article coming explaining how that's a good thing for future earnings growth?
what planet has jbmaria been living in for the last year?
======================...
Respected Sirs/Madams,
The increase in short interest over last two week
provides further solid evidence that the stock
price is being depressed for May 16th authorization
of 600M shares which could potentially be followed
by debt for equity swap at the depressed prices.
If company management agrees to debt for equity
prices at the obviously depressed prices with clear
evidence that it was manipulated down by shorts
(a huge percentage of last two weeks "supply"
of shares was short sales); that would prove
beyond doubt that E*Trade Management is working
as an accomplice in a plan to defraud E*Trade
shareholders and letting other parties buy E*Trade
on cheap.
Given the strengthening balance sheet,
increasing revenues and customer base,
and reducing mortgage losses as evidenced
by last quarter's conference call; there is
NO IMMEDIATE need to reduce debt by equity
swaps.
At this point, I suspect that people shorting
this stock are the same people who are going
to acquire shares in debt to equity swaps
and are not concerned about having to "cover"
their shorts. By rewarding them with stock
at cheap prices, the CEO would essentially
be participating in such plan and violating
fiduciary duty towards share-holders.
I would like to plead the CEO and E*Trade
management/BOD in this open
letter NOT to approve ANYMORE debt for
equity swaps in near future until the stock
price has stabilized at a normal level.
- Quasi
P.S.: This is going to various forums,
Investor relations at E*Trade (previous
emails to them have gone unanswered) and
SEC both as an open letter to CEO and a
possible "pre-warning" about a crime about
to be committed.
I suspect E-Trade will be North of $10 by this time next year if not sooner. I'm not selling, already made a nice profit, don't even have a protective stop at this point.
Shareholder mtg. 16-May-08 02:09 pm
Here are my 2c worth on the meeting (I was there):
1. ETrade is in a withdrawl mode to survive. They are pulling all stops to reduce costs (debt) and sell non-core businesses. I had the feeling that there is a phobia just to keep the business alive.
2. Layton is not a visionary. He appears to be a very methodical bank beaurocrat who is intent only on stabilizing ETrade.
3. Reading through the lines we can expect another 2 years of 'steady as she goes' before anything else happens. The problem is more writedowns coming
4. All growth initiatives are at best on hold or are being jettisoned to raise cash. An example is 2 questions asked a) what happened to the UK Bank Charter approval. A 'don't care' answer to that, and b) why have a separate account for global trading whereas competitors don't have it. 'Don't know answer' to that.
5. The answer to the question of HELOCs frozen across the board or on a case-by-case basis was ambiguous. First answer was case-by-case and then the statement was made that ETrade will eventually exit the HELOC program and outstanding credit on all accounts are being frozen to exit the business.
Summary: My overall feeling was that ETrade will be dead in the water for another 2 years at least. The competition is taking advantage and leaping ahead with their own initiatives. ETrade will have to make a quantum leap to catch up no less to surpass the competition, a daunting task at best when they are behind. All bets are off if Layton is replaced in about 2 years by a more aggressive individual.
run35ok
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