E*Trade Stock Offering May Be Red Flag

NEW YORK (TheStreet) -- E*Trade Financial's (ETFC Quote) plans for another common stock offering could be a red flag, given that the troubled company just recently recapitalized its balance sheet through a $1.7 billion debt-for-equity exchange and raised more than $600 million in common equity this summer.

E*Trade on Monday terminated its stockholder rights plan and said it planned to issue up to $150 million in common stock, according to a release. The decision to terminate the plan was decided at the company's special shareholder meeting in August, where stockholders also approved the debt exchange offer.

Under the terms of the at-the-market stock offering agreement, approved by E*Trade's board of directors, the company would sell up to $150 million of common stock. It plans to use the proceeds from the sale to "enhance liquidity for the parent company as well as for working capital and general corporate purposes," it said.

As part of the program, the company also entered into an agreement with Sandler O'Neill & Partners to sell the shares. These shares will be offered at market prices prevailing at the time of sale, E*Trade said. It may also sell shares of its common stock to Sandler O'Neill, as principal for its own account, at a price agreed upon at the time of sale, it said.

But David Trone, an analyst at Fox Pitt Kelton Cochran Caronia Waller, questioned why E*Trade needs to raise capital so soon after completing both an equity raise and much-talked about debt-for-equity exchange.