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| User Info | Etrade only received 11 cents on the dollar!; entered at 2007-12-02 06:20:55 | |||
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Al_tannr Posts: 64 Registered: 2007-09-02 Europe 
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Rmonical & Analyzer, don't be so quick to jump on Bhatia's calculations. Everybody has the same base figures, and one thing that the analysts do well is get those figures. The question here is how to interpret the 85 million shares issued to Citadel. From the press release, you cannot tell how much of the "$1.6 billion of capital in exchange for 12.5% senior unsecured notes and common stock" is debt and how much is equity. But during the Q&A session of the conference call, E*Trade execs said that that the 12.5% interest would be paid on the whole $1.6 billion. (That is when I liquidated my long position during pre-market. It looks like I wasn't the only one whose opinion changed at that moment.) I take that to mean that E*Trade is in hock for $1.6 billion of notes issued to Citadel. So what about the millions of shares of stock issued to Citadel? Either you treat them as just a free bonus for Citadel. Or, if you think that stock has value, you could retranch it from money paid for the ABS portfolio. I suspect that is what Bhatia did to arrive at his figures. I've also read that there were tax reasons for structuring the deal this way, but I don't remember any details nor would I probably have understood them. By the way, the most convincing theory that I've seen for E*Trade accepting such a horrible deal came from a sharp poster on another bulletin board. He wondered if bank regulators had told management that they were on the verge of taking over the bank. Alan Last modified: 2007-12-02 06:23:39 by al_tannr
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