NEW YORK (
took advantage of recent positive market momentum to quickly complete a $150 million stock offering, the company said Wednesday.
E*Trade sold 80.2 million shares in a so-called "at the market," or ATM, offering. This method of raising capital allows a company to sell new shares at the prices prevailing in the open market, as opposed to a secondary offering, in which the company sells stock to a group of institutional investors at an agreed-upon price, usually a discount to where the stock is trading.
The New York-based online brokerage said the offering had gross proceeds of $150 million (net proceeds were $147 million after commissions and offering expenses). Sandler O'Neill & Partners acted as the sole distribution agent for the offering.
The company's stock has been in heavy rotation of late with volume from the past three sessions totaling more than 850 million. E*Trade and
have been, by far, the most actively traded issues on U.S. exchanges this week.
All that volume has come with gains. Based on Tuesday's close of $1.92, the shares was up 13% since Thursday's finish at $1.70. The stock is off a penny to $1.90 Wednesday afternoon with volume recently above 87 million. It's traded in a tight range of $1.88-$1.95 for the session.
While the company has been troubled by underwater home equity and other mortgage loans as well as a devalued securities portfolio, E*Trade recently completed a recapitalization plan through debt swaps and an equity offering, and still has a well-performing brokerage business. It also has hedge fund giant Citadel Investments as its largest debt and equity holder.
E*Trade announced the offering on Sept. 14, saying it plans to use the proceeds from the new offering to "enhance liquidity for the parent company as well as for working capital and general corporate purposes."
David Trone, an analyst at Fox Pitt Kelton Cochran Caronia Waller, says that assuming the entire proceeds of the offering are used for E*Trade's bank subsidiary, its excess risk-based capital would be $1 billion and its total risk-based capital ratio would be about 14.5%. This would provide a "further buffer" to absorb loan losses or to "possibly engage in problem loan sales, which would accelerate losses into the near-term," Trone writes in a note to clients. He maintained an in-line rating on the stock, the firm's equivalent of a hold.
With shares trading around $1.90, we do not find the risk/reward compelling, as losses at the bank could be worse than our base case, while we believe a split up of the firm and wind-down of the bank would net only $1.68 a share," Trone writes.
Trone had questioned
decision to make the offering when it was announced last week, especially since the company had just completed the $1.7 billion debt for equity swap and a separate $600 million equity raise this summer.
Trading in shares of E*Trade's fellow online brokers was mixed Wednesday.
's stock was up 2% to $19.03,
shares edged 0.75% higher to $20.07, and
shares added 0.43% to $18.61 but
's was off 0.81% to $8.52.
--Written by Laurie Kulikowski in New York.