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User Info	Etrade only received 11 cents on the dollar!; entered at 2007-12-02 15:12:13
Al_tannr Posts: 64 Registered: 2007-09-02 Europe	Correct, ETrade received $1.6 billion for issuing $1.6 billion of 12.5% notes to Citadel and issuing 85 million shares to Citadel. Said another way, ETrade issued $1.6 billion of notes to Citadel, and also gave 85 million shares to Citadel as a free bonus. But wait, aren't those 85 million shares worth something? I would think so. Bhatia is simply rephrasing what happened like this: ETrade issued $1.6 billion of notes to Citadel, and also received $800 million for the ABS portfolio together with the 85 million shares. Bhatia valued the 85 million shares at about $450 million, so that left a valuation of $350 million for the ABS portfolio. This critical information -- that ETrade issued $1.6 billion of notes and will be paying 12.5% on the entire sum of $1.6 billion -- is not available in any of the official announcements and press releases. The SEC filing is still not out, as far as I know. This fact was only deduced during the Q&A session of the conf call. The stock price really started diving as that info sank in. The big question before the conf call was, What's the debt/equity split for the cash infusion? The answer apparently was: debt/equity = 100%/0%. It is just a horrible deal for E*Trade. Alan 2007-12-02 15:12:13