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
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

Retirement income shouldn’t be an afterthought
Retirement income shouldn’t be an afterthought

Why “one big pool of money” needs predictability—and a plan.

LPL posts record adjusted earnings as recruiting pipeline hits new high
LPL posts record adjusted earnings as recruiting pipeline hits new high

Advisor recruiting climbed to its strongest pace in nearly two years, while CEO Richard Steinmeier said the firm has "cleared the decks" for bigger institutional deals.

MirrorWeb, WealthReach ink deals to cement compliance and marketing leadership
MirrorWeb, WealthReach ink deals to cement compliance and marketing leadership

The combinations involving Red Oak and AdvisorRankings illustrate how AI is reshaping both wealth firm operations and wealthtech platforms' business models.

Kelly Park Capital streamlines private market access with PRISM 2.0
Kelly Park Capital streamlines private market access with PRISM 2.0

New 5-in-1 onboarding tool aims to cut subscription paperwork as advisor demand for private markets accelerates

Build deeper relationships and drive business through niche branding
Build deeper relationships and drive business through niche branding

Connecting unique offerings with a specific client niche is a sure path to advisor satisfaction and success – but it all has to start with an intentional strategy.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income