Shares of E*Trade (NASDAQ: ETFC) are up more than 8% on news that insiders and directors have acquired $1.9 million worth of stock in recent days. But investors should be cautious.
The buying was in all probability coordinated to send a message to investors -- and Wall Street is eating it up. But the reality is that $1.9 million is just not that much money in the context of the amount that the company top executives are paid.
The insider buying, in conjunction with the money E*Trade will spend on Super Bowl ads, looks like a pretty desperate and transparent effort by the company to convince investors and customers that the company is OK.
But think about it: if everything is so rosy, why isn't Ameritrade (NASDAQ: AMTD) jumping in with an offer to acquire the company, something it had previously contemplated doing at a much higher price?
E*Trade executives appear to be hoping that if they can convince people everything is peachy, it will be. But that's not a game you want to be playing.
E*Trade shares up on insider buying
Posted Jan 30th 2008 1:28PM by Zac Bissonnette
Filed under: Insiders
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Reader Comments (Page 1 of 1)
1-30-2008 @ 2:28PM
Barry said...
While what you are saying is true in terms of $1.9M being a small amount bought into the company, and clearly it is well timed with the announcement of the super-bowl ads - I have to seriously disagree with your logic about AMTD not buying e*trade.
Firstly, both Schwab and TD Ameritrade were contemplating a purchase of e*trade earlier this year - however they were so confident that customers would orgaincally leave e*trade and migrate to their platforms that they decided not to pick up this great company at a great price. Citadel - quite simply a smarter investing company - saw no problem buying a huge stake in e*trade.
Either way, I do consider this news about the execs. buying stock to be manipulating and transparent. But don't look down at the stock just because AMTD didn't capitalize on this opportunity - they can't even get their platform right.
Thanks,
Barry
http://www.buffettjr.com