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

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.