In a bid to increase its customers' access to U.S. IPO and
follow-on equity offerings,
E*TRADE Financial Corporation
) entered into a retail alliance with investment bank Jefferies
LLC - a fully-owned subsidiary of
Leucadia National Corporation
). Through this agreement, E*TRADE customers will gain access to
Jefferies' underwritings of IPO and follow-on equity offerings.
E TRADE FINL CP (ETFC): Free Stock Analysis
INVEST TECH-NEW (ITG): Free Stock Analysis
LPL FINL HLDGS (LPLA): Free Stock Analysis
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With the aforementioned agreement, E*TRADE is looking to entice
investors by offering assurance of access to IPOs that brokerage
firms usually reserve for their eminent clientele. Most brokerage
firms generally provide access to fresh issues of a newly traded
company to favored institutions and affluent clients.
However, with this deal, E*TRADE offers its customers the
opportunity to participate in a Jefferies offering if they
conform to certain conditions and offer bids to buy at the
offering price or higher.
E*TRADE is still recovering after an almost-fatal venture into
mortgage lending prior to the 2008 financial crisis. The
company's efforts to reduce balance sheet risk appear to be
promising in the long term. Also its decision to focus on core
operations and exit the market making business during 2013 is
expected to improve profitability further.
Notably, the brokerage firm ended 2013 with 3.0 million brokerage
accounts, up 3% year over year. E*TRADE's expertise as a primary
brokerage firm is expected to be a foil for Jefferies' Equity
Capital Markets platform. The agreement is expected to help
Jefferies in providing corporate clients with better service.
Even though benefits from such retail alliances in the past has
been below expectations for other firms, we believe, it will be a
significant top-line growth driver for E*TRADE, as there will be
significant rise in the volume of equity offerings available to
E*TRADE currently carries a Zacks Rank #2 (Buy). Some
better-ranked investment brokerage firms include
Investment Technology Group Inc.
LPL Financial Holdings Inc.
), both carrying a Zacks Rank #1 (Strong Buy).