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Savings Experiment: Snow RemovalLess than a week after selling $3 billion worth of asset-backed securities for about 30 cents on the dollar, E*Trade (NASDAQ: ETFC) is hiking the yields on its savings account and short-term CDs. According to The Wall Street Journal, "For savers, E*Trade's move presents an opportunity to take advantage of rates that are among the highest available on short-term deposit accounts and are several percentage points above national averages."
And now, ladies and gentleman, the greatest PR spin of the month, courtesy of Jarrett Lilien, E*Trade's acting chief executive. She told the Journal that "it was a great opportunity to give a thank you to our loyal customers in the face of a difficult time like the last couple of weeks".
Right -- but what about the shareholders who will see the higher rates paid right out of what's left of E*Trade's equity?
There's only one good explanation for this move: E*Trade is still desperate for cash, and is willing to throw money at customers to keep itself afloat.
Why hasn't E*Trade been sold yet? According to the USA Today, "Both Schwab and Ameritrade had been circling E*Trade about a possible deal, but the chief executives of both brokerages said they were not interested in touching the company's banking assets. Lilien said E*Trade was not interested in being split up, and that the overall business was in fine shape."
E*Trade had tried to spin the Citadel infusion as a temporary thing to allow the company to take more time to evaluate sale and merger opportunities. But this latest move sheds a bit more light and leads me to only one conclusion: E*Trade won't be able to find a buyer at an attractive price, and its efforts to keep itself afloat, like paying usurious interest rates to keep its customers there, will only destroy more shareholder value.
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Reader Comments (Page 1 of 1)
12-03-2007 @ 4:15PM
Dan Blue said...
I still believe Etrade will be bought out at a $8-$12. The buyout won't take place until Etrade shed's itself of all questionable liabilty.
Etrade took many steps forward when it sold part of itself to Citadel and got rid of some of the bad asset's. This should make Etrade more attractive to it's buying.
I would love to see Etrade sell it's Bank for additional Cash.
What we will have left will be the core business.
It's brokerage accounts and its retail stores. Then I believe it will be aquired for it's Cash and core assets.
This may all be happening behind the scene's. It's not like they could broadcast this information. If they did the stock would skyrocket.
The cash that etrade has on hand is worth more than the stock value. If I was E trade I would start buying stock back at a low rate.
Dan Blue
Posted by Dan Blue at 12:26 PM 0 comments
Labels: Etrade (ETFC) Buyout
Etrade (ETFC)
Etrade was downgraded by Bank of America today. The reason is clear to me and to all. It's in retaliation move. Bank of America has billions of dollars in bad loan, and E Trades move exposes all the banks. The banks are currently shifting money around and will take loses over the next several quarters. E Trade took the loses all at once.
Smart move.
Dan Blue
12-04-2007 @ 1:29PM
UC said...
Dan, you seem a tad bit too hopeful. There is a lot of corruption in the way financial analysis is done, but the reason you give for BoA having reduced E*Trade's rating is quite lame.
12-04-2007 @ 12:14PM
Raymond said...
I agree. Anyone can see that the situation would deteriorate faster and faster. Citadel is not an idiot and bet on Etrade if the situation could not be reversed and let Etrade revive again. Citadel got nothing secured from Etrade for its 2.5 cash infusion but only 3bil ABS by 800mil. The unsecured notes and shares could not withstand another bankrupt rumor .