E*Trade’s management has put on an excellent demonstration of how to destroy a company in five short months:
- Make insanely risky portfolio bets
- Announce that you’ve lost so much money you’re not even sure how much you’ve lost
- Denounce a sceptical analyst as “irresponsible” without providing any details
- Shed exactly one employee (the CEO)
- Sell half the company’s equity at a fire sale price–but don’t raise enough cash to solve the problem.
- Watch helplessly as other analysts join the downgrade parade.
Bank of America’s analyst predicts E*Trade is headed to $2, in part because the company’s brokerage brand has now been damaged. Reuters:
BofA analyst Michael Hecht believes negative value at E*Trade cannot be offset by the retail brokerage business, which he said was a dwindling asset.
Hecht expects the best-case scenario for E*Trade to be another $1 billion addition to its reserves, while the worst case would be a continued fire sale of assets resulting in an outright sale of the company’s home equity portfolio.
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