redbeard20000

TD Ameritrade: Raising Funds for Possible E*Trade Deal

I think it makes a lot more sense that they sold the bonds for the reasons they said... to retire other outstanding debt. They had a little more than 1.25 Billion in long term debt, most of which matured in 2012. The issuance of new debt allows them to spread out the maturity dates as well as get a lower interest rate. It was an easy way to increase the value of the company so they took it.

I really think AMTD is only interested in buying ETFC if they can get them at a discount. Considering the improved conditions at etrade, I doubt they will be distressed sellers and no deal will happen.

E*Trade Takeover Chatter: How Should an Investor Respond?

2.9 Billion shares available, no way they ever get 10$ a share. AMTD only has enough cash to over low 2's. Thats why I don't think AMTD buys them out. A larger bank could handle it though. 2.50-3$ a share gets a deal done imo.


On Nov 18 07:36 PM dan clue wrote:

> As a shareholder of Etrade ETFC I want to see them go it alone unless
> the new owner for example ameritrade would pay $5 cash along with
> every four shares of Etrade you would get one Ameritrade share.
> That would be fair due to the fact that Etrade is sitting on over
> 4 billion in Cash and has 1.2 billion in debt. The brokerage unit
> is a cash cow . The company is expected to loss only one penny in
> the fourth quarter. What if it breaks even or a penny profit. That
> stock will hit $10.

E*Trade: Potential Ameritrade Merger Makes Sense for Both Companies

Obviously they'll still take big losses on the HELOCs but the majority of the damage is behind them. The reason they had such huge losses in prior quarters wasn't because so many loans were going bad, but because they had no loss reserves and had to build them. Now they're done building reserves and future provisions will be dramatically less than prior ones. They had over 30 Billion in loan exposure at the end of 2007. That number is down below 20 Billion now. They also have 1.2 Billion in reserves. Delinquencies in the HELOC peaked back in Q408.

They only lost 60 mil last quarter on an operating basis. They have an additional 29 mil in interest savings from the debt for equity swap that they'll see this quarter. They also paid a 37 mil penalty for early payment of debt. Those two alone are enough to bridge the gap, and thats not even mentioning loan loss provisioning dropping from 347 mil down to probably just around 300. They're going to be break even or very close to it this quarter, and it will only improve from there.

Sure it might take them 3 years before the mortgage mess is completely behind them, but they'll be making money long before then. Company is easily worth double what its trading at right now in 2 years. Definitely worth the wait in my opinion.

E*Trade: Potential Ameritrade Merger Makes Sense for Both Companies

lol, very true TOS customers are probably more valuable on a one for one basis than ETFC. This whole AMTD buy out talk is nonsense anyway, they really aren't big enough to swallow Etrade, imo. They only have 1 Billion in cash, so it would have to mostly be a stock deal. Couple that with the relationship that Etrade has with Citadel and all the convertible notes floating out there, not to mention the loans, and I don't think they have the firepower to get a deal done.

Regardless I still think Etrade is a great buy at these levels, in 2 years they'll have a market cap rivaling AMTD. They make the same amount as AMTD on a pre-provision basis, and I wouldn't be surprised if their return to profitability and financial soundness in the next couple of quarters helps them to add a lot more customers. E*Trade is still the most valuable brand out there.


On Nov 14 05:00 PM User 488509 wrote:

> I think AMTD is realizing the high volume option traders are a more
> desirable acquisition target. SWIM clients really goosed their DARTs
> and ETFC clients won't.
> KISS.

E*Trade: Potential Ameritrade Merger Makes Sense for Both Companies

Funny, AMTD says its clients traded 12.9 times per year on average this year. Lets see... 12.9/12 = .... about once per month. Don't know why you're always bashing ETFC. Maybe you'll stop once they post a profit this quarter.


On Nov 14 12:10 PM User 488509 wrote:

> Jeremy wrote,
>
> "Now, it makes perfect sense for AMTD to buy ETFC as now all the
> analysts believe ETFC has turned the corner. It would take AMTD about
> 15 years to add 2.7 million brokerage accounts, or it could gain
> that amount in a flash by buying ETFC."
>
> Think you're looking at this wrong. Profits are mostly generated
> at AMTD by trading commissions and the ETFC accounts are slugs ,
> trading on average about once a month.
> The recent SWIM acquisition brought them extremely high volume traders
> , note the recent jump in AMTD DARTs after SWIM came on board. Seems
> to me more logical that AMTD would go after an OXPS or IBKR for those
> lucrative accounts than ETFC.
> Add in the big debt levels and liabilities ETFC would bring to a
> merger and I think your theory is weak at best.
> Here's Reppetto's comment on the loan portfolio value:
>
> "TD Ameritrade is the most likely acquirer for E*TRADE," he says.
> The main problem with acquiring E*TRADE is taking over the roughly
> $8.28 billion in home equity loans, which would have to be marked
> to market, a burden he believes TD Ameritrade could handle.
>
> The going rate for fair value on those loans is roughly 60 cents
> on the dollar, a level that would result in a $3.3 billion writedown
> for the acquirer. Repetto says TD Ameritrade's TD Bank business could
> cover that writedown and assume the assets, while the company's brokerage
> arm would be happy to take over the online trading accounts. "It
> rids itself of a competitor," says Repetto. "

Ten Most Prominent Underperformers in Corporate America

Etrade will break even this quarter. Majority of the losses have already been accounted for.

E*Trade: Potential Ameritrade Merger Makes Sense for Both Companies

Look at the trend in operating earnings the last 5 quarters. Should be pretty obvious that they'll be making a profit soon, if not this quarter. They've already built their loan loss reserves, now they're in the process of drawing down that reserve.

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.