E*Trade (ETFC): Saved By Hedge Fund Citadel

E*Trade (ETFC) appears to have taken its medicine and saved itself. A $2.3 billion cash infusion from hedge fund Citadel–and CEO Mitch Caplan fell on his sword and resigned.  Good news for shareholders: E*Trade only appears to have given up 20% of its stock to save itself. All things considered, that’s not a bad outcome.

Reuters:

Online brokerage E*Trade Financial Corp, which has been pounded by credit woes in the mortgage business, is getting a $2.55 billion cash infusion from Citadel Investment Group, the Wall Street Journal reported Thursday, citing people familiar with the deal. According to the Journal, Citadel will make a two-part investment in E*Trade in a bid to restore confidence and liquidity in the discount brokerage.The first part of the deal is the purchase of E*Trade’s entire $3 billion portfolio of asset-backed securities for a value around $800 million, the newspaper said. The second component is the purchase of $1.75 billion worth of 10-year notes, paying an annual interest rate of about 12.5 per cent, according to the Journal.

Following the regulatory approval process, Citadel is expected to own a 20 per cent stake in E*Trade, including the nearly 3 per cent it already owns, and gain a board seat, the Journal said.

See Also:
E*Trade’s Desperate Ads Crush Stock Again
E*Trade CEO Denies Bankruptcy, Risks Jail Time
How E*Trade Can Save Itself
E*Trade Plays the Wimpy “Irresponsible” Card

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.

Tagged In

sai-us