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E*TRADE Financial Corporation Message Board

  • movin_on_agin movin_on_agin Aug 3, 2009 12:58 PM Flag

    Why would new holders vote for dilution?

    I guess the reason will be that most (that vote for) will simply trust that the plan being put forward at this time is the companies only choice.

    That may have been the case just 2 months ago before they raised almost $600 million in the 2 offerings but with the business continuing to improve I assure you that there are now much better alternatives.

    And none require the issuing of 1.7 billion shares of new stock through this convert program.

    consider just this.

    Our burn rate on cash is now down to JUST $28 million in the last quarter and Layton indicates that with the mortgage portfolio shrinking in size each quarter and the delinquencies shrinking shrinking that the peak has probably happened. Which means that going forward there will be more improvements here.

    Now with JUST a burn factor of $28 billion per quarter or $112 million for a full year) we could go "years" before running into cash trouble here.

    So why kill the shareholders??

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    • the office of thrift supervision is why, they need to assure the regulators that they are going to make it, once the company begins to generate signficant profits, they can retire some of the converts (Citadel can't convert it because to do so would force them (owning more than 25% common) to register as a bank holding company which they would never want to do. So Citadel will hold convertible debt and probably sell it back to ETFC once ETFC has the capital ratios and profitability to do so (2011) the reefer

    • It also makes them qualified for the tarp program too now that they will have stock to issue to the govt.

      of course this request for the large amount of stock may never be needed if economy improves. this at least takes bankruptcy off the table for now.

    • Guess who will own all the stock and profit while retail suffers

    • Repeat: Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC! Citadel steals ETFC!

    • Nor do you have anything other than comments from Layton to gauge this from as far as Etrade is concerned.

      My nose has been twitching for days now as I said I can show you much better ways to solve our debt issues than the one he chose here.

      My hunch is he paniced and now he needs us to vote down this issue so that he can go back to the drawiong board and save face.

      As I relook at all events and the timing it appears that he was in a corner "UNTIL" he got the $600 million. This was like the key that got him out of jail and bought him more time.

      Now the vote going against him probably saves his ass and gives him a new leaf on live with current shareholders.

    • "So why kill the shareholders??"

      It is giving up debt in exchange for equity.

      It is a wash to current shareholders!!!

      Why so peculiar with you, moving?

    • Would it have anything to do with the provisioning the OTS demanded?

      (I'm asking, Movin', not disagreeing.)

      • 1 Reply to head_pollywog
      • head

        For the record I would much rather talk with someone other than that ass.

        Btw, a good question.

        But think of this this way Etrade has a declining loan portfolio of loans by about $5 billion per year since they left the business. They have less than $25 billion left.

        In Q2 the business is making making $340 million up from $279 million in Q1 and still they aren't taking full advantage of $5 billion in cash sitting in the bank per the last CC and the pointed questions put to them by a couple analysts.

        In anycase when you anualize that and knock off a little for the summer months you get at least $1 billion coming in from the business to support as profits to handle more provisioning.

        In addition each quarter as loans pay down there is freed up cash at the bank of about $75 million per billion so you can see there is significant cash flowing here and as the loans continue to pay down the need will be much less.

        As these facts show you there is no reason for the OTS to be concerned with this company at this time.

        This entity is probably much better off than probably 70-75% of all banks out there now. I repeat this money raise has done a lot to put the company in a strong financial position.

    • Btw, make that $28 million instead of $28 billion.

      Thanks BJ for not catching this yet.

      • 1 Reply to movin_on_agin
      • Well that is the cash needed to be provided above the cash provided from the business.

        The business here provides all but $28 million of what is needed. The company since Layton has taken over has always taken a strong stance on provisioning as you can see by the numbers.

        In fact his first full year he built a cushion above the amount used by $580 million and he keeps building into the new year though not as much. When he does this the company has to put money asside to cover this and there is where some questioning comes in since Etrade has been reserving above the levels of other banks.

        A situation that might not make sense as other banks are still taking on new loans and have far more risk as new loans usually imply a higher degree of trouble.

        Etrade with a maturing portfolio that is shrinking by billions each year should be as Layton said peaked and headed down the other side. He further says that when the peak happens the drop is hugh so look for in by Q4.

        Which further begs the question "why kill the shareholders by massive diluting a cash rich bank that will only get better?

        Can it be that even Layton and the board other than Griffin hopes this vote fails as thing have changed drastically since it was announced.


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