Is E*Trade (ETFC) getting ready for a sale?

Posted Mar 3rd 2008 4:45AM by Douglas McIntyre
Filed under: Deals, Management, Private Equity

E*Trade (NASDAQ:ETFC) did something odd. It made a former vice chairman of JP Morgan (NYSE:JPM) its new CEO. It would be hard to imagine that he has much experience in the discount brokerage industry. Donald Layton has been non-executive chairman of the company since Citadel Investment Group put $1.75 billion into the brokerage firm last November.

According to The Wall Street Journal "Citadel has nearly a 20% stake, and tapping Mr. Layton is a sign Citadel is getting antsy for results." The brokerage firm still have $12 billion of home loans on its books. It is hard to assign them a value while real estate prices are still dropping and default rates are rising.

Citadel may want to sell the discount brokerage firm but that would cause potential problems with other E*Trade investors. What would be left over is a company with a large pool of mortgages which are still falling in value. Getting a return on the discount brokerage operation might be a good idea on paper but separating it from the balance of the company is no "slam dunk". Shareholders don't want to be left holding that mortgage bag.

Douglas A. McIntyre is an editor at 247wallst.com.

Tags: E*Trade, ETFC, inthenews

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Reader Comments (Page 1 of 1)

3-03-2008 @ 5:31AM

daniel.cooper53 said...

The Wall Street Journal just released on their web site Etrade positioning itself for Sale. They have discussed this matter with their primary shareholder Citadel who owns almost 22% of Etrade and they are looking for a buyer for their Mortgage business to better position itself for sale. Etrade names former vice chairman of J.P. Morgan, as CEO of the online brokerage. This is big news expect Etrade shares to rise on Monday. I predict this sale to be complete by months end.

4-10-2008 @ 1:27PM

Michael Harrison said...

ETFC is 12% off its April 08 high.. waiting for earnings report...will it gap up or gap down....it is holding at its April 1 gap up support level of 4.00.......