, one of the 10 largest online brokerages, will soon announce the sale of a majority stake in the company to venture capital and private equity firms in a deal that will raise $700 million,
The New York Times
The investment comes at a time when online brokerages are struggling to maintain the high growth rates they have experienced in previous years. Many are expanding their services to include financial advice and banking in an attempt to smooth out revenues. Datek, however, has stuck with its focus on executing trades cheaply and quickly.
Datek declined to comment on the report or the talks. The firm in August confirmed that it had reached an agreement to buy out its principle shareholders, Jeffrey Citron and Sheldon Maschler. They have been with Datek from the beginning, when the firm was a daytrading firm racking up regulatory problems. Datek is said to want to distance itself from Citron and Maschler.
Datek's troubles with regulators -- which according to the
continue with investigations by the
Securities and Exchange Commission
U.S. Attorney for the Southern District of New York
-- have prevented it from raising funds in the past, both in the private and public markets. Datek's popular electronic stock trading system,
, also has suffered because of these problems, with its own
hopes of a spin-off being kept on hold while Datek cleans house.
Both Island and Datek were left hanging in 1999 when
pulled a planned investment in them. Then
, the online brokerage, pulled its investment in Island. (Vulcan is an investor in
, publisher of this Web site.)
In the end, Boston-based venture capital firm
invested in Datek, pumping just under $200 million into the company.
According to the
, which cited executives close to the negotiations, TA Associates will invest in this round of financing, which will be lead by private equity firm
. Bain will put in $300 million, the newspaper reported.
Citron and Maschler will get about $500 million for their stake, which equals about 52% of the company, the
reported. Citron stepped down as chairman and chief executive about one year ago.