posted
E*Trade Shares Fall, Analyst Says Bankruptcy Possible (Update1)
By Edgar Ortega
Nov. 12 (Bloomberg) -- E*Trade Financial Corp., the online brokerage that underwrites mortgages, declined as much as 32 percent in New York trading after the company said earnings will fall short of forecast because of a drop in the value of some securities.
Rating cuts on $208 million of asset-backed securities last month spurred a bigger-than-expected reduction in their value, E*Trade said in a regulatory filing after the close of official trading Nov. 9. The drop will require the company to record ``significant writedowns'' this quarter, the filing said.
E*Trade will post a loss in the fourth quarter after setting aside $500 million in extra money for bad loans and writedowns, Citigroup Inc. analyst Prashant Bhatia, wrote in a report. Clients of the New York-based company's brokerage unit may shift their accounts to rivals, while deposits at the bank could erode, wrote Bhatia, who cut his rating on the stock to ``sell'' from ``hold.''
``The extent of poor risk management in our view, has put the viability of the franchise at risk,'' said Bhatia, in the report entitled ``Bankruptcy Risk Cannot be Ruled Out.''
Chief Executive Officer Mitchell Caplan's strategy of building E*Trade's bank by tripling loans outstanding backfired as more borrowers fell behind on payments and U.S. home prices declined. The U.S. Securities and Exchange Commission also began an informal inquiry on Oct. 17 ``into matters related to the company's loan and securities portfolios,'' E*Trade said.
Shares Tumble
The company's shares sank to their lowest since May 2003 in trading before the open of U.S. exchanges, losing as much as $2.71 to $5.88 at 9 a.m. in New York. The stock has lost almost three-quarters of its value this year, wiping out about $7 billion in market value.
E*Trade is the worst performer among the 12 stocks tracked by the Amex Broker/Dealer Index. Shares of rivals Charles Schwab Corp. and TD Ameritrade Holding Corp. have advanced at least 10 percent this year.
E*Trade reported its first quarterly loss in five years last month and slashed its 2007 forecast because of rising costs for bad debts at the online bank. For the period ended Sept. 30, E*Trade lost $58.5 million, or 14 cents a share, compared with a profit of $153.2 million, or 35 cents, a year earlier.
E*Trade said 2007 profit would be between 75 cents and 90 cents a share, cutting its forecast for a fourth time this year. In September, the company estimated earnings of between $1.05 and $1.15 a share.
The company said in the filing that the value of some of its $450 million in asset-backed collateralized debt obligations had ``significant declines.'' E*Trade said it expects to remain ``well capitalized'' and will no longer provide an earnings forecast because of difficulty in valuing the securities.
``The writedowns will depend on future market developments, including potential additional downgrades, and the estimated fair values of these securities'' at the end of the year, E*Trade said.
To contact the reporter on this story: Edgar Ortega in New York at ebarrales*bloomberg.net .
Last Updated: November 12, 2007 09:12 EST
Posts: 2503 | From: connecticut | Registered: Mar 2005
| IP: Logged |
posted
They aren't skimping on their advertising campaign. Seems to me their commercials have at least doubled over the last two to three months.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
| IP: Logged |
posted
stock dropped like a rock when this was posted! nice bounce play on news. I wanted people who trade with these guys to be aware of what was happening!, lots of talk on other boards about traders moving thier accounts. FWIW! GLTA!!
Posts: 2503 | From: connecticut | Registered: Mar 2005
| IP: Logged |
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
| IP: Logged |
ETFC is now claiming that bankruptcy will not happen....
we shall see....If anything, I would expect a "takeover"....
Glancy Binkow & Goldberg LLP -- Representing Shareholders of E-TRADE Financial Corporation -- Announces Update to Shareholder Lawsuit -- ETFC LOS ANGELES, Nov. 14, 2007 (PRIME NEWSWIRE) -- Glancy Binkow & Goldberg LLP -- representing shareholders of E-TRADE Financial Corporation -- announces 19 days remaining to move to be a lead plaintiff in the shareholder lawsuit. All persons and institutions who purchased or otherwise acquired the securities of E-TRADE Financial Corporation ("E-TRADE" or the "Company") (Nasdaq:ETFC) between December 14, 2006 and September 25, 2007, inclusive (the "Class Period"), may move the Court not later than December 3, 2007, to serve as lead plaintiff; however, you must meet certain legal requirements.
If you wish to receive a copy of the Complaint, or have any questions concerning your rights or interests with respect to these matters, please contact Michael Goldberg, Esquire, of Glancy Binkow & Goldberg LLP, 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067, by telephone at (310) 201-9150, Toll Free at (888) 773-9224, or e-mail to info*glancylaw.com, or visit our website at www.glancylaw.com.
The Complaint charges E-TRADE and certain of the Company's executive officers with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and dissemination of materially false and misleading statements concerning the Company's business, prospects and financial condition caused E-TRADE's stock price to become artificially inflated, inflicting damages on investors. E-TRADE, through its subsidiaries, offers financial services to retail and institutional customers worldwide, including retail investments and trading, checking, money market and savings accounts, mortgage and home equity products, real estate loans, and various consumer loans. The Complaint alleges that throughout the Class Period defendants failed to disclose that: (1) the Company was experiencing increased delinquencies in its mortgage and home equity portfolios; (2) the Company had failed to adequately reserve for loan losses and would be forced to take $95 million in charge-offs and provision expenses of $245 million in the second half of 2007; (3) the Company had failed to timely record impairments on certain securities and, consequently, such portfolios were materially overvalued; and (4) as a result of the foregoing, the Company's statements about its 2007 financial and operational results were lacking in any reasonable basis when made.
On September 17, 2007, E-TRADE shocked investors when it announced that the Company was exiting the wholesale mortgage business, restructuring its institutional brokerage business, and revising its previously issued 2007 financial guidance, and that it expected, among other things, "severance, restructuring and other exit charges" of $32 million as a result of its decision to exit and restructure the businesses. Additionally, the Company stated that it was revising its earnings guidance for 2007, to an earnings-per-share (EPS) range of $1.05 to $1.15 for the year, significantly lower than the Company's previously issued EPS guidance in the range of $1.53 to $1.67. As a result of this news, over the next six trading days E-TRADE shares fell $2.32 per share, or more than 16.3 percent, to close on September 25, 2007, at $11.89 per share on heavy trading volume.
Plaintiff seeks to recover damages on behalf of Class members and is represented by Glancy Binkow & Goldberg LLP, a law firm with significant experience in prosecuting shareholder lawsuits, and substantial expertise in actions involving corporate fraud.
If you are a member of the Class described above, you may move the Court, not later than December 3, 2007, to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action or have any questions concerning this Notice or your rights or interests with respect to these matters, please contact Michael Goldberg, Esquire, of Glancy Binkow & Goldberg LLP, 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067, by telephone at (310) 201-9150 or Toll Free at (888) 773-9224 or by e-mail to info*glancylaw.com.
More information on this and other class actions can be found on the Class Action Newsline at www.*********wire.com/ca
CONTACT: Glancy Binkow & Goldberg LLP, Los Angeles, CA Lionel Z. Glancy Michael Goldberg (310) 201-9150 (888) 773-9224 info*glancylaw.com www.glancylaw.com
-------------------- Please DON'T invest on JMO. Do YOUR research. Invest UR money the way YOU would like to! Thanks! ;) Posts: 936 | From: Virginia | Registered: Aug 2007
| IP: Logged |
posted
This stock was on fire Friday. I jumped on the bandwagon & bought some in the morning watched it rise higher & higher by the end of the day. I plan on selling soon as I don't know how true the rumors are that it will sell to another company as the info came from an unidentified source. This is getting a lot of buzz though that's for sure.
-------------------- You tried your best and you failed miserably. The lesson is, never try. Posts: 14 | Registered: Nov 2007
| IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
