E*Trade Shares Dive Nearly 60 Percent
Posted on: Monday, 12 November 2007, 15:00 CST
E*Trade Financial Corp. shares dived nearly 60 percent Monday after the online U.S. brokerage warned of further write-downs on its mortgage-backed securities.
The discount brokerage service for self-directed investors also said the U.S. Securities and Exchange Commission was conducting an informal probe into matters related to the company's loan and securities portfolios.
A CitiGroup Inc. analyst said the online brokerage could face bankruptcy.
E*Trade shares were down 57.86 percent, or $4.97, to $3.62 a share in mid-afternoon trading on the Nasdaq Stock Market. Shares fell earlier to $3.50.
The credit losses could fuel an exodus by depositors, forcing the company to sell assets, leading to $5 billion in losses and more than wiping out tangible equity, analyst Prashant Bhatia wrote in a client report.
He predicted a 15 percent chance of bankruptcy.
The online brokerage told customers in a Web site message that market conditions would likely get worse before they got better but that the firm remained well-capitalized.
As a matter of fact, we could absorb an immediate write-down in excess of $1 billion and still remain well-capitalized, President and Chief Operating Officer Jarrett Lilien said in the message.
He said E*Trade was taking prudent measures to shore up its balance sheet.
Source: United Press International
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