E-Trade Financial prices public stock offering

The struggling online brokerage and bank looks to raise capital to pull itself out from under mortgage-related loan losses.
DEC 10, 2009
By  Bloomberg
E-Trade Financial Corp. said Friday that it priced a public offering of 435 million shares of common stock at $1.10 per share as the struggling online brokerage and bank looks to raise capital to pull itself out from under mortgage-related loan losses. In late April the company said that the Office of Thrift Supervision had asked it to raise capital quickly after it reported a larger-than-expected first-quarter loss and boosted its reserves for bad loans. The money from the stock offering, along with a debt exchange offer, could help E-Trade lower its debt and buffer itself further from loan losses. The company anticipates gross proceeds from the offering of $478.5 million, prior to underwriting discounts and commissions. On Wednesday E-Trade announced it would sell $400 million of its stock. E-Trade said the offering's funds will provide additional equity capital and be used for other corporate purposes. The company was hit hard by the recession and collapse of the real-estate market as the value of investments, especially those tied to residential real-estate loans, plummeted. E-Trade gave the offering's underwriters the option to buy up to an additional 65 million shares to cover any overallotments. A Citadel Investment Group LLC affiliate bought 90.9 million additional shares in the offering, giving it an approximately 17 percent stake in E-Trade. Citadel Investment Group is E-Trade's largest shareholder. E-Trade also plans to exchange more than $1 billion in outstanding debt, with the capital infusion from the stock offering and debt exchange being used to help its banking subsidiary — which has accounted for the bulk of the losses. The stock offering is targeted to close Wednesday. E-Trade said earlier this week that once the offering closed it would offer to exchange more than $1 billion in outstanding debt. Citadel will exchange at least $800 million in debt as part of the program. The debt exchange allows E-Trade to lower its debt by eliminating the interest payments that are tied to it. In premarket trading, E-trade shares declined nearly 15 percent to $1.22 from Thursday's close of $1.43.

Latest News

LPL adds $600M UBS team in Tennessee
LPL adds $600M UBS team in Tennessee

The firm's latest additions, led by a second-generation financial advisor, are striking out via its Linsco employee advisor channel.

eMoney supports focused financial planning with enhanced needs analysis
eMoney supports focused financial planning with enhanced needs analysis

The Fidelity-owned fintech aims to help advisors connect with mass market and mass affluent prospects with single-goal conversations.

Trump SEC pick Paul Atkins grilled by Democrats in early political test
Trump SEC pick Paul Atkins grilled by Democrats in early political test

The prospective chair of the agency has pledged to shed conflicted interests and "return common sense to the SEC."

Finra moves to boot Alpine Securities, same firm that claims the regulator can’t
Finra moves to boot Alpine Securities, same firm that claims the regulator can’t

'If I were on the side of Alpine Securities, I’d put all my eggs in the federal court,' one attorney said.

CFP Board floats new procedural rules around bankruptcy, misdemeanors
CFP Board floats new procedural rules around bankruptcy, misdemeanors

If approved, the proposed revisions would achieve outcomes similar to the existing process while reducing the burden of oversight.

SPONSORED Retirement plan balances are flourishing. Why are so many advisors missing out on a $3 trillion opportunity?

Participants who receive professional 401(k) advice see higher returns on average, net, than those who don't.

SPONSORED Focus on clients, not compliance – why Gary Corderman found his fit with Farther

This wealth management platform finally delivers on the technology promises other firms couldn't - giving advisors a better way to scale and serve