Now that the E*trade (
) acquisition chatter has officially started, I have a few thoughts
on the matter:
1-The next major catalyst for ETFC is choosing a new CEO. This
is one of the hottest jobs on Wall Street and should be in high
demand. Whoever comes in will have free reign to get a deal done.
There isn't anyone left at Etrade who cares about the company's
history or who desperately wants it to remain as a stand alone.
Current Etrade management appears to welcome a takeover. If
Etrade brings in a CEO with experience in coordinating mergers
and acquisitions that will be a very good sign. This really is a
blockbuster opportunity for a CEO to sign on, get a chunk of
stock options, and exit with $20 million worth of gains 6 months
2-I still don't think TD Ameritrade (
) is the ideal takeover. Because of the mortgage mess on
E*trade's books, I see a larger bank being more suited to
E*trade. Someone like Wells Fargo (
) or JP Morgan Chase (
) or even a regional bank that wants to make a splash in the
brokerage business would be a tremendous fit. As a Wells Fargo
customer myself, I would be ecstatic to see the E*trade platform
become part of the service.
3-Don't let the mortgage mess fool you. The E*trade platform
is highly sought after. As one who has used TD and Schwab (
), the E*trade user experience is a breath of fresh air. E*trade
is a major player in a quality industry.
So what happens next? The acquisition chatter will heat up
then it will stall as these things typically do. The key for the
new CEO will be to try and get more than one bidder. Who knows,
maybe even Citadel will join the bidding process to try and push
the price up although recent comments from the hedge fund
indicate they are looking to diversify away from large positions
in single companies. Investors need to be patient, have a good
time horizon, and let the game come to you.
Option LEAPS alert: The November
newsletter recommended owning the January 2011 $5 calls. This is
a very high risk/high reward position. For those looking for
something more secure, look to own the stock itself, or the
January 2011 $2.5 strike, or even the April 2010 $1.50 strike.
All represent great opportunities as we head into the new
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