redbeard20000

E*Trade: A Screaming Buy

Theres a good chance Etrade breaks even this quarter. Approximately 28 million in interest savings from the debt exchange have yet to be realized, since the exchanged closed during the middle of the quarter. Q4 historically has better trading revs than Q3, and loan loss provisions should continue to moderate.

They have 1.2 Billion in reserves and management believes charge offs have peaked at 350 million per quarter. Additional loan loss reserves should start to dip significantly below 350 million so they can start to draw down that $1.2 Billion cushion.

Last quarter they had 251 million in pre-provision, pre-tax earnings. Adding in the 28 million in interest savings and higher earnings from the brokerage, that number should push close to the 300 million mark this quarter. Loan loss provisioning should see another significant drop, as its has for the last few quarters. Theres a good chance that number drops far enough to make etrade break even/profitable this quarter.

E*Trade: Very Undervalued

As for whether they need to raise additional capital, I don't believe they do. If it turns out they do need to, it will probably be small, a few hundred million dollars.

My reasoning for this is, they generate substantial income on a pre-provision basis. Between 200-250 million per quarter (actually 250-300 million post debt for equity swap). Delinquency trends are improving and their total loan portfolio is declining rapidly, over 5% per quarter. They also have 1.2 Billion in loan loss provisions and ~500 mil in cash at the parent level that they could inject into the back. So they already have quite a cushion against future losses. Considering management believes write offs peaked last quarter at 384 million and loan provisions peaked before that, they are rapidly approaching the point where earnings from the brokerage and bank will make up for the losses in the loan portfolio. In fact, the bank is projected to be a net generator of capital this quarter, (they only burned 28 million in capital last quarter). As long as the bank generates excess captial, there shouldn't be a need to raise additional equity.

E*Trade: Very Undervalued

Again, go look up the definition of a convertible bond, as well as some examples of how they are processed.

This is where you are confused

"If you need to establish a ratio , why not do it with the exchange , i. e., exchange 1034 notes for 1000 debentures?"

It because it acts as both a debt security and potential equity. Lets use an example with numbers that are clearer:

Stock ABC is trading at 20$ per share and they decide to issue 1$ Billion in convertible debt. So they issue 1 Billion in face par of notes, with a conversion price of 20$. This means the holder of the bond, can either A.) Collect 1$Billion in cash payment at the end of the period, or B.) exchange their notes for 50 million shares. They would have to trade in 20$ worth of notes to get one share. Notice how this is exactly what Citadel is doing, they are trading in 1.034$ worth of notes to get 1 share.

This is why they need to state a "conversion price", thats the lingo used. The notes can either be exchanged for face value, or converted into stock at a set ratio, the conversion price.

As for whether they

How Apple's Market Share Will Propel Stock to $500, Part 1

I do believe that Apple is a great company and should see above average growth the next few years. I do have a couple of concerns though. As you noted, they already have 91% share of the 1k+ PC sales. Theres no room for growth in that segment in terms of market share. Since Apple doesn't offer much below this price point, the only way they can continue to show growth is if there is a continuing shift in consumers from the low end of the market to the high end. They've done an excellent job so far grabbing the most profitable segment of the market, the question is, how much more room for growth is there?

My second question has to do with the high margins the Iphone currently enjoys. How long can Apple continue to enjoy upwards of 60% margin on these devices? As we've seen, the competition in smart phones is intense, and the newer devices put out by the competition are getting closer to rivaling the IPhone. I feel that this will inevitably force Apple to accept lower margins on their phones. A good example of this is the China Unicom deal. Apple is only receiving 300$ per phone with China Unicom, whereas in the deal with AT&T its estimated that they get about 600$. With an estimated cost to produce of ~180$ as you can see, their margins go from about 70% to a more modest 40%, and the profit per phone goes from 420$ to 120$. They have to sell 3x as many Iphones in China to make the same profit as in the US! I expect this trend to continue, especially if they end exclusivity deals with carriers.

Apple is undoubtedly on top of their game right now, the question is, how long will they stay on top? Remember, they were left dead in the water only 8 years ago, before the launch of the IPod. Things can change quickly in the consumer electronics arena. Apple must continue to come up with better ideas than the competition and execute them better. Whether they'll be able to do this? Your guess is as good as mine.

Btw, I love the new magic mouse.

E*Trade: Very Undervalued

Thanks for not disappointing, you continue to hold by your views even when you're clearly wrong. Again, look at the SEC filings and notice that Citadel exchanges 1.034 debentures for 1 share of common stock. This is the conversion price and you continue to mistake it for extra cash Citadel has to pony up.

As for the rest of your analysis, again its hard to have a debate with someone who misses so badly on a rather simple point, and refuses to admit they're wrong when faced with overwhelming information to the contrary. Its like trying to have a debate with a 5 year old. Good luck with whatever position you may or may not end up taking.

E*Trade: Very Undervalued

Citadels holdings are currently worth over 1.5 Billion. They're also up close to 1 Billion$ on their investment, hard to sit on profit like that.

E*Trade: A Solid, Deep Value Stock

What numbers are you using for long term debt? Post debt for equtiy swap I have these numbers:

414 mil in 2013 7 3/8 notes
243 mil in 2015 7 7/8 notes
~800 mil in 2017 12.5 notes

So 1.45 Billion in total. Their pre-provision earnings are 200-250 mil per quarter, so you're looking at 7 quarters to pay off the debt. This excludes the additional loan loss provisions they have to make. My estimate for those future provisions is 1.5 Billion, or ~7.5% of current loans receiveable. Adding the two together you get about 3 Billion, which they should be able to cover in 3 1/2 to 4 years, if you really want to look at it that way. Considering the earliest maturity isnt until 2013, I'd say they have plenty of time.


On Oct 23 08:28 AM Anthony Alfidi wrote:

> Calling ETFC a speculative play is absolutely correct. Have you noticed
> their long term debt load? Net income (which has been negative for
> two years) would have to suddenly turn positive, rise by several
> multiples, and stay there for a decade to pay off that debt. Shareholder
> equity has declined for three years straight. ETFC is a penny stock
> for very good reasons.

E*Trade: A Solid, Deep Value Stock

Heres my take on the current earnings report:

Etrade basically already released most of the relevant info for this
quarter so I'm pretty confident in my expectations of -60 mil in
operating earnings. They could surprise to the upside with sales of
securities, those holdings have had a huge increase this quarter, and if they sold off a bunch this would come out in the earnings report and might push them positive for this quarter. However, thats more of a one-time gain thing and while very nice, doesn't really reflect how well the company is doing.

I'm kinda disapointed with the special mention deliquency rates, they only declined 4% q/q as of the end of August, which is basically the same rate at which their total portfolio declined. Which means people are failing to make payments at the same rate as last quarter. I would hope for more of an improvement in that area, but at least its not getting worse. Overall shrinkage of the loan portfolio is great though, at over 5% per quarter.

They currently have around 6 Billion in cash and equivalents at the
Bank, and management stated they hoped to get that down to around 2 Billion. They have just about 4 Billion in Repos and FHLB advances due by the end of the year so hopfully they dont roll those over and just use the cash to pay them off. This will make their capital ratios look ALOT better, at least the Tier 1 ratio which is what most people make a fuss about. If they do that they'll have equity somewhere a little north of 4 Billion (assuming all the debentures get converted) and slightly more than 40something Billion in assets. Having 6 Billion in cash at the bank doing nothing when they no longer have liquidity problems, is kinda a waste.

E*Trade: A Solid, Deep Value Stock

Can't wait til he comes back and posts that we're STILL wrong. I've passed being annoyed and am now humored by this.

E*Trade: A Solid, Deep Value Stock

Email Etrade investor relations and ask them to explain it to you. Or better yet, look at the SEC filings by Citadel. Notice when they convert the debentures, they only receive 1/1.034 shares per debenture redeemed. Please explain that to me.

Table II - Derivative Securities Beneficially Owned ( e.g. , puts, calls, warrants, options, convertible securities)
1. Title of Derivate Security
(Instr. 3) 2. Conversion or Exercise Price of Derivative Security 3. Trans. Date 3A. Deemed Execution Date, if any 4. Trans. Code
(Instr. 8) 5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 6. Date Exercisable and Expiration Date 7. Title and Amount of Securities Underlying Derivative Security
(Instr. 3 and 4) 8. Price of Derivative Security
(Instr. 5) 9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4) 10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4) 11. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares
Class A Convertible Debentures due 2019 $1.034 10/1/2009 M 25849000 8/25/2009 8/25/2019 Common Stock 24999032 (5) 887398000 D (4)
Class A Convertible Debentures due 2019 $1.034 10/2/2009 M 454000 8/25/2009 8/25/2019 Common Stock 439071 (5) 886944000 D (4)

E*Trade: A Solid, Deep Value Stock

The language of the PR is quite clear. You're just too stupid to understand and refuse admit that you're wrong. You have no understanding of convertible bonds and likely little understanding of anything financial. Thanks for wasting the time me and Ricard spent replying to your uninformed nonsense. If you actually know someone who works in finance you should ask them to explain the situation to you, I for one am done trying.

E*Trade: Very Undervalued

Guys, their loan portfolio is in full runoff mode. They've already taken the worst of the losses, they are 1-2 quarters away from the break even point, and this quarter they should be a net generator of capital at the bank. Don't forget about the debt for equity swap either. This will cap upside potential (I think its only a double in a year from now at this point) but it added tons of equity to the company. They now have more equity than SCHW and way more than AMTD, yet trade at huge discounts to both. Everyone always talks about the fully diluted share basis, but nobody really pays attention to the fact they added 1.7 Billion in equity or how thats going to help them 2 years down the road once their out of loan loss mode.

E*Trade: A Solid, Deep Value Stock

Also note that Citadel sold their remaining 12.5% notes at 106, or 6% above par, at least to the company I work for. How do I know this? Because I saw the trade ticket come through! (Obviously you'll "believe" I'm lying, but that doesn't matter really, cause I "know" you are full of shit.) You expect me to believe that they were able to sell their 12.5% notes above par, yet are losing money on the convertible debt, debt that has increased in value by over 30% since it was issued? You're basically saying that when they did the debt for equity transaction, the 12.5% notes Citadel held were currently worth only about 50% of face value. Even though it was senior secured debt, and in bankruptcy court the brokerage unit would of gotten at least 5 Billion and after the mortgages were liquidated, even at a big loss, Citadel would still have most likely got all their money back. Last time I checked KG didn't become insanely rich by making stupid deals that undervalue his holdings by 50%.

E*Trade: A Solid, Deep Value Stock

I know you love links so heres one:

www.investopedia.com/t...

Read up on what a convertible bond actually is, cause its clear you have no clue. Citadel exchanges their bonds for stock, not their bonds and cash for stock. Just the bond for the stock.

Heres another link:

www.stchas.edu/coursed...

Check out BUS220, its a class that teaches you about such things, and it shouldn't be too hard to get accepted, even for you! I hope I'm not assuming too much by thinking you've graduated high school!

In the mean time, please feel free to stop posting stuff you know next to nothing about.


On Oct 22 02:56 PM User 488509 wrote:

> I don't believe I'm double counting anything , you and redbeard need
> to explain the June 22, 2009 PR that stated the terms of the exchange:
>
>
> "E*TRADE FINANCIAL Announces Debt Exchange Offer and Consent Solicitation
>
>
> NEW YORK, Jun 22, 2009 (BUSINESS WIRE) -- E*TRADE FINANCIAL Corporation
> (NASDAQ: seekingalpha.com/symbo...) today announced the
> launch of its debt exchange offer for certain of its outstanding
> high-yield notes (the "Exchange Offer"), on the terms and subject
> to the conditions set forth in the Offering Memorandum and Consent
> Solicitation dated June 22, 2009 (the "Offering Memorandum") and
> the related letter of transmittal (the "Letter of Transmittal").
> The consummation of the Exchange Offer will be subject to certain
> conditions, including the closing of the Company's previously announced
> registered public offering which priced on June 18, 2009, shareholder
> approval and regulatory approval. Affiliates of Citadel Investment
> Group L.L.C. ("Citadel"), the Company's largest stock and bond holder,
> have agreed to participate in the Exchange Offer.
>
> The Company is offering to exchange more than $1 billion of newly-issued
> zero coupon Convertible Debentures due 2019 (the "Debentures") for
> all of its 8% Senior Notes due 2011 (the "2011 Notes") and a portion
> of its 12.5% Springing Lien Notes due 2017 (the "2017 Notes", and
> together with the 2011 Notes, the "Notes"). The Company is offering
> to exchange $1,000 principal amount of Debentures for every $1,000
> principal amount of the Notes tendered in the Exchange Offer. The
> Exchange Offer is designed to significantly reduce the Company's
> debt service burden by eliminating interest costs relating to those
> debt securities that are exchanged and lengthening the weighted-average
> maturity of its debt securities. The Debentures will have a maturity
> of 10 years and will be convertible into shares of common stock at
> an initial conversion price of $1.0340 per share for Class A Debentures
> and $1.5510 per share for Class B Debentures, which is 150% of the
> initial conversion price of the Class A Debentures. The terms of
> the Class A Debentures and the Class B Debentures will be identical
> except for the initial conversion price. "
>
>
> To me it's quite clear , $1000 in notes will be Exchanged for $1000
> in debentures -that's even up.
> The debentures then give you the right at any time to buy shares
> at $1.034-very clear and simple.
> I'm not sure you two have ever understood this?
>
> There's a filing floating around somewhere in which ETFC announces
> it collected approx. $420m in proceeds from the conversion ,believe
> ETFC was aware of that incoming cash the Friday just before they
> announced the ATM offering. We'll see the item in Q4 report I believe
> but redbeard is correct that if all the debentures are converted
> ETFC will net approx. $1.7 Bill. at considerable dilution,of course.
>

E*Trade: A Solid, Deep Value Stock

There are other examples where you're interpretation of facts are flawed. For example you site an analyst who predicts losses will ultimately come to 6.4 Billion on their loan portfolio. What you failed to realize, however, was that this was CUMULATIVE losses for the whole period, not losses going forward. Etrade has already realized 2 Billion in losses, and they have another 1.2 Billion in loan loss reserves. So 3.2 Billion in losses is already accounted for, meaning under the WORST CASE SENARIO, they are already half way through the loan mess.

I could go on, but you get my point. Maybe you should reconsider your position or at least look at the facts again to make sure you're interpreting them correctly.