E*Trade’s CEO Stepping Down – Analysis
I heard some sad news today about E*Trade’s (NASDAQ: ETFC) CEO, Donald Layton, stepping down at the end of the year. It’s sad because he was doing such a great job at the company and I just happened to own some E*Trade stock. Considering the mess that E*Trade was in with the terrible mortgage portfolio they’ve been struggling with this past year or two, I have to give Mr. Layton an A+ on the job he’s done so far.
He was able to help E*Trade get additional liquidity, raise money at the right times, and get some help from Citadel when the company needed it the most. It bought E*Trade just enough time for their profitable brokerage division to turn around and help shoulder some of the losses from its souring mortgages. So what does it mean, now that he’s leaving? Very good question.
I have little doubt that they’ll find a good replacement for Mr. Layton. But I do wonder if this move is related to the company setting itself up for an acquisition. E*Trade’s brokerage division is state-of-the-art, popular, and profitable. It’s one of the best discount-brokerages out there and I can see Schwab (NASDAQ: SCHW) and Ameritrade (NASDAQ: AMTD)) salivating over the opportunity to snatch this baby up.
There was some rumor of E*Trade looking to get acquired when Donald Layton first took the job at E*Trade but I think this time around, it’s even more of a possibility. Citadel, who has a huge stake in E*Trade, may really push for the company to get acquired this time. It would make sense since it’s likely that E*Trade’s debt (which Citadel holds a huge amount of) will be paid back immediately and Citadel can fully realize the gain on it’s investment in ETFC. It’s a perfect scenario for Citadel and probably still a win for the common shareholders since the any buyout will likely be a premium over the current stock price of $1.66.
Anyways, if a buyout does happen 6 months or a year down the line, just remember — you read something about that at Investcraft!
