User 488509

Level 3: Will Acquisition Rumors Come True?

Jeremy,
I think it's time you apologize for your relentless , almost incoherent pumping of an ETFC buyout?

TD Ameritrade And E*Trade: Wedding Bells?

SO WHEN'STHE NEXT RUMOR?

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

Jason,

You keep referring to ETFC's mortgage mess but back in April you assured us ETFC would refi its way out of it-have you abandoned that theory?

seekingalpha.com/artic...

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

Up 9% today on more AMTD rumors.Absent rumors,nothing is pushing POS up that I can see.

I'd be shocked if Moglia approved an ETFC buyout even at these pps levels. Watch them take out OXPS or IBKR instead.

And I still don't think their HELOC's are done causing pain.


On Nov 14 05:42 PM redbeard20000 wrote:

> 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.

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

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.


On Nov 14 03:43 PM redbeard20000 wrote:

> 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.

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

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. "

E*Trade: Very Undervalued

After reading the SEC link,I have to concede the point.
Huge difference in PR language and SEC filing but as you say, mea culpa for not checking both.

What a horrible deal for shareholders in addition to that massive dilution , Layton could have done better.But that's a whole other debate better left for a lawsuit I'd guess.

This leaves ETFC with $1.7 B less capital than I was assuming and to my mind hastens any new secondary. It also adds to KG's incentive to resume converting and selling at the earliest opportunity.

Let's see what they announce today.


On Oct 26 09:37 PM Ricard wrote:

> LOL, I wonder if I'm going to miss all the work I am doing for you...probably
> not.
>
> Read this 8-K:
>
> yahoo.brand.edgar-onli...;type=sect&dcn...
>
>
> The 'money paragraph' to settle your concerns:
>
> "The Debentures will (i) have a ten year maturity; (ii) not bear
> interest; and (iii) be convertible into shares of common stock at
> any time at the election of the holder into a number of shares equal
> to the quotient of (x) the principal amount of Debentures of such
> class to be converted and (y) the conversion price applicable to
> such Debentures immediately prior to conversion; provided that no
> holder may convert Debentures to the extent such conversion would
> result in either (seekingalpha.com/symbol/a) such holder beneficially
> owning in excess of 9.9% of our outstanding common stock (which limitations
> may be waived by such holder), or (seekingalpha.com/symbol/b)
> such holder owning in excess of 24.9% of our outstanding common stock,
> under the OTS control rules, which limitations may be amended or
> waived, as applicable, upon the later of (a) one year notice to the
> Company and (b) receipt of any necessary regulatory approvals; (iv)
> contain customary anti-dilution provisions; and (v) will have covenants
> and events of default substantially similar to those of the 2017
> Notes."
>
> Read this paragraph carefully until you get it. It defines the exact
> process as to how to convert the debt into equity, and at what ratio.
>
>
> I still recommend you read the book I linked for you. PR announcements
> are probably the last place I look for any meaningful information
> on a company.
>
> Principle amount is $1000, you know the conversion price, and OTS
> has waived the 24.9% requirement.
>
> I think we are all now on the same page.
>
> On Oct 26 10:30 AM User 488509 wrote:

E*Trade: Very Undervalued

OK,here's the text again;

"
"E*TRADE FINANCIAL Announces Debt Exchange Offer and Consent Solicitation

NEW YORK, Jun 22, 2009 (BUSINESS WIRE) --

........

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. "

The language seems clear to me.The notes are exchanged 1000 for 1000 of debentures.The debentures are described very much like an option , you pay $1.034 for a share of stock any time you decide to convert in the next ten years.

Some questions for you.
Why call it a "price' if no money will change hands , why not a conversion "ratio"?
If you need to establish a ratio , why not do it with the exchange , i. e., exchange 1034 notes for 1000 debentures?


I always allow for the possibility I may be wrong but this language seems clear to me. We'll see Tuesday.

As to your follow on question about ETFC capital needs.
If they are getting this conversion money as I believe , the chances of an immediate stock sale become small. If you are right , and they are not receiving any conversion capital , I think they'll have to raise capital very quickly. To my mind , the dilution was crippling enough for ETFC , to not be getting the $1.034 for shares would be devastating.And if KG resumes selling on Wednesday , why would you want to buy until he's done?


On Oct 25 10:21 PM redbeard20000 wrote:

> 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

Ricard,
You're flat out lying when you say attribute the comment 'Massive losses" to me.My contention is KG wasn't making the big profits on the conversion since everyone is leaving out the notes original cost.You and redbeard deny the cost of converting the debenture at $1.034.
We'll know Tuesday which of us is misreading the terms of exchange and conversion.BTW- if ETFC isn't collecting the $1.034 per debenture conversion , that would almost guarantee a new , dilutive offering very, very soon, maybe at the CC.

Other than that I'll stick with my overall assessment of KG's history and intent fully knowing predicting a hedgie,s moves is a perilous game at best.


"Regarding your thesis that Griffin is standing by ETFC,this is how I see it.

As recently as May, KG owned about $2.2 to $2.4 Billion of 2017's paying 12.5%.
In early summer we saw a small item in a filing that KG had sold $200m in 2017's to parties unknown. He also sold 13m common.
As part of the recapitalization plan,KG exchanged approx. $1.3 Billion in 2017's for debentures.
Then on 9-17-09, a filing reveals KG sold for cash all his remaining 2017's ($750m worth) and another $100m of other interest bearing notes from ETFC.

The latest 13D filed by KG (10-13-09) shows he owns 821m debentures and 166m shares of common, nothing else.

Adding it all up,I figure since the OTS put the screws to Layton and KG after Q1 ,
KG has unloaded approx. 60% of his various shares and paper with ETFC's name on it.

Is Citadel totally abandoning ETFC ?
Dunno.

KG is converting and selling at a "determined " pace.
There's also a general perception that KG is converting at $1.03 and selling above $1.70 to lock in hefty profits. I think that's a bit of an urban legend as nowhere is the cost of the underlying note that was exchanged for the debenture factored in. KG could actually be taking loss on large part of the debentures.
Arguments that he's selling to stay under regulatory limits are bogus , as shares are converted and added to the existing outstanding pool, KG's ownership % is actually going down from a fixed point in time where the OTS declared Citadel in compliance.
Checkler's Dow Jones article hinted at a serious rift between KG and ETFC mgt. but he never gave me any color on it when I asked.
To the best of my knowledge,the sale of the non-convertible notes was totally unforced.

My SUSPICION is he's salvaging what he can and ridding himself of ETFC , these are not the actions of an investor confident the biz is turning around.
The caveat is we know from other articles he'll need to meet redemptions at his hedge funds in January but I doubt ETFC is the "only " asset he can monetize for this ,seems more of a choice.

If KG abandons ETFC, they lose their "protector".
It was his arrival that "saved" the franchise (just ignore the lousy deal terms ).
He was the star who led other institutions to buy the secondary and it was his concessions on the converts that allowed ETFC to reduce their crushing debt burden and satisfy the OTS.

And I SUSPECT they may soon need another protector.
Their most recent ATM capital raise came within hours of them announcing over $400m in receipts from conversions and the final tally of the $600m in the big secondary. David Trone commented that the OTS demanding more reserves at that time didn't appear to be good news-I concur.
I seriously doubt it a coincidence that the share authorization voted on in August included an "extra" 1.1 billion shares.

Another concern is the new holders of the 2017's. Should the OTS demand further debt relief , the current owners of that debt might have less incentive than KG to cooperate."

E*Trade: Very Undervalued

Forgot to insert the ancient link:

messages.finance.yahoo...


On Oct 24 12:43 PM User 488509 wrote:

> So you got suckered by a 2007 story , shows a keen attention to detail
> on your part.
>
> Here's a rumor about a GS or AXP buyout , maybe you can use it??
>

E*Trade: Very Undervalued

Rcard,you're still ignoring Griffin's sale on 9-15 of approx. $850 in ETFC notes which means his overall holdings in ETFC have shrunk from $2.5B in April to under $1B as of last week.
That's 60%!!!!!
Not the sign of confidence or support from ETFC's largest investor.


On Oct 23 11:26 AM Ricard wrote:

> I think you're being unduly harsh. I like your conjecture that the
> stock sales have been precursors to KG's own sales - there's a lot
> of truth in that statement. It explains the ATM sale even though
> ETFC was not in need of the capital.
>
> Still, looking at the regulatory trail, seems that KG has made concessions
> to stay above 25% in ETFC, and probably needs to stay under 33% to
> avoid the 'eye' in Washington. He's right there in that sweet spot.
> Selling has slowed to a crawl, and ETFC is 'over-capitalized'.
>
>
> KG also has his own problems at HQ, so there are more angles than
> just a pump-and-dump scheme going on.

E*Trade: Very Undervalued

So you got suckered by a 2007 story , shows a keen attention to detail on your part.

Here's a rumor about a GS or AXP buyout , maybe you can use it??


On Oct 23 06:41 PM Jeremy Richards wrote:

> Seems my rumor source was talking about old news: www.marketwatch.com/st...
>
>
>
> SAN FRANCISCO (MarketWatch) -- Hedge funds SAC Capital and Jana Partners
> have taken an 8.4% stake in TD Ameritrade and have told the discount
> broker to pursue a merger with one of its rivals, according to a
> regulatory filing by the company on Tuesday.
>
> TD Ameritrade /quotes/comstock/15*!amtd (AMTD 19.42, -0.46, -2.31%)
> said in the filing that industry consolidation is an important consideration
> of its board and noted that the board has formed a mergers and acquisitions
> committee that includes three outside, independent directors.
>
> The company also said that it has expressed interest in the past
> in growth through mergers or acquisitions, but at the right time
> and if it can find the right "strategic fit."
>
> TD Ameritrade shares jumped almost 10% to $21.87 during after-hours
> trading on Tuesday.
>
> The discount brokerage business is dominated by Charles Schwab /quotes/comstock/15*!schw
> (SCHW 17.94, -0.16, -0.88%) , TD Ameritrade and E-Trade Financial
> /quotes/comstock/15*!etfc (ETFC 1.66, -0.01, -0.60%) . There has
> already been consolidation, but this year speculation about more
> deals has resurfaced. TD Ameritrade stock has jumped more than 30%
> during the past two months, while Schwab shares are up at more than
> 15% and E-Trade more than 10%.
>
> E-Trade stock gained more than 3% in late trading on Tuesday, while
> Schwab shares rose 1.4%.
>
> SAC, one of the largest hedge fund firms in the world run by Steven
> Cohen, and Jana, a big fund with an activist bent managed by Barry
> Rosenstein, have sought regulatory approval to buy more TD Ameritrade
> shares worth over $600 million, the company added in the Securities
> and Exchange Commission filing.
>
> "TD Ameritrade can dramatically increase long-term shareholder value
> through a combination with E-Trade Financial or Charles Schwab,"
> Cohen and Rosenstein wrote in a letter to the company's top executives
> and its board of directors.
>
>
> I still believe AMTD will buy ETFC in the future as do many analysts.
>
>
> Monday & Tuesday ETFC should see gains ahead of earnings.

E*Trade: A Solid, Deep Value Stock

Quite simply you just ignored the $1.034 cost to convert the debenture to a share.
Read the damn PR , it's clear as a bell.

> "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."

On Oct 22 05:51 PM Ricard wrote:

> "The double cost: $1 bond lost, $1 convertible bond lost
> The double revenue: $1 convertible gained, 1 share ETFC gained"<br/>
>
> Let me outline the entire transaction from $ to $:
>
> Citadel buys a 12.5% bond, costing $1000
> Citadel earns interest on this bond, $125 x 2 years = $250
> Citadel swaps 12.5% bond for convertibles at 1:1 basis, no cost<br/>Citadel
> swaps one convertible bond for around 1000 ETFC common
> Citadel sells 1000 shares ETFC common in the market, books around
> $1700.
>
> $ costs: $1000
> $ gains: $1700 ($700 capital gains), $250 in interest.
>
> Ladies and gentlemen, let me present to you a healthy profit.

E*Trade: A Solid, Deep Value Stock

You two can tap dance and double talk all you want, you're still wrong.The language of the PR is quite clear unlike Ricard's gibberish.
Let's just wait and see if the conversion cash shows up in the 10k.

And please stop mis-characterizing what I'm saying and my intent , I'm just trying to get the story right before buying or shorting or just giving up on it. This story is so distorted by amateurs and pros alike it's amazing.Some of the beat writers missed the note sale on 9-15 entirely.
No denying ETFC was DEAD without the exchange and share sales.
But it wasn't a bonanza for KG nor the shareholders who got diluted beyond recognition.
If the dilution is over and the loans are really improving you could possibly make a buy case but neither concept is close to certain as I see it.

E*Trade: A Solid, Deep Value Stock

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: ETFC) 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.


On Oct 22 01:53 PM Ricard wrote:

> Redbeard:
>
> I was about to post something similar, thanks for pointing this out.
>
>
> I do not understand why our ill-tempered friend is double-counting
> the cost of the convertibles.
>
> The correct math, assuming his logic, is that Citadel took a 22 basis
> point loss in the debt conversion (78 cents for $1), and then booked
> anywhere from a 75-100 bp gain in the equity conversion ($1.75-2.00
> for $1), for net 53-78 bp gain. This is still a very healthy profit.
> Furthermore, I do not recall the original debt being zero-coupon
> - one reason ETFC swapped the debt for convertibles was to avoid
> the interest payments.
> www.fool.com/personal-...
>
>
> User 488509, I ask that if in the future you decide to continue your
> posts, please provide links to substantiate your logic. I am beginning
> to suspect your line of thinking.