(Updated with common stock offering details)
NEW YORK (
shares were boosted by a fresh surge of confidence Monday after a Citigroup analyst upgraded the stock to a buy rating.
The online brokerage's stock jumped as much as 7.8% Monday morning after Citi analyst Keith Walsh increased his rating to buy from hold and raised his 12-month price target to $2.30 from $1.50.
Separately on Monday, E*Trade terminated its stockholder rights plan and said it planned to issue up to $150 million in common stock, the company said in a release. The decision to terminate the stockholder rights plan was decided on at the company's special shareholder meeting in August, where stockholders approved the debt exchange offer. Recently, shares were up 4.8% to $1.74.
Walsh, in a research note, expressed confidence in the stock because the company's recent capital actions have "allayed concerns" regarding the company. The positive outlook is a reversal from Walsh's pessimism on E*Trade earlier this year. Walsh had expressed doubts in March about the
of the company in a note in which he initiated coverage on E*Trade.
Walsh wrote in a note dated Sept. 13 that "the recent capital changes coupled with normal earnings from the core underlying business show the company can withstand losses even under our most conservative loan loss scenario."
He is also increasingly optimistic about E*Trade being acquired, possibly by one of its two rivals,
-- particularly as the loan portfolio stabilizes.
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.
E*Trade 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.
E*Trade's capital and financial position has been precarious since the credit crisis unfolded. Its banking subsidiary has been slammed by troubled home equity and mortgage loans and from significantly devalued mortgage-backed securities bought earlier in the decade. Regulators told the company this spring to raise capital quickly amid its improved -- yet still struggling -- loan portfolio and low levels of capital in its banking subsidiary, as compared to other financial firms.
The company recently completed a $1.7 billion debt exchange as well as raising $615 million of equity in a public offering to deal with its capital constraints.
--Written by Laurie Kulikowski in New York.