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Research Outline

Prepared for Olga F. | Delivered October 10, 2019

E*Trade

Goals

To find information regarding the "almost liquidation" of E*Trade to better understand the process and consequences.

Early Findings

  • Our initial research did not provide a fruitful path. Using multiple combinations of search strategies provided us only with information regarding the 2007 crisis.
  • E*Trade chief denied bankruptcy rumors in 2007. E*Trade shares lost more than half their value in 2017 after a Citigroup analyst suggested there could be a run on the company's bank. The speculation came after the New York-based brokerage firm announced late Friday that it will take further writedowns on its collateralized debt obligations, or CDOs, and second-lien securities portfolio. Shares plunged 54.5%, or $4.68, to $3.91 in midday trading, after a Citi Investment Research analyst said the online brokerage could face bankruptcy. Late Friday, E*Trade warned investors that its write-downs will be larger-than-expected in the fourth quarter.
  • In 2015, E*Trade retired much of the debt from its 2007 rescue. “Now the focus can finally be on core operations,” says Piper Jaffray analyst Jason Weyeneth. Customer assets have returned to pre-crisis levels, reaching $285 billion in the first quarter of 2016. Of that, $49 billion was in retirement-savings accounts with access to adviser support—the business that E*Trade is counting on to drive growth. Building such asset pools is a must for any online brokerage, says Scott Smith, director at financial analytics firm Cerulli Associates. “You’re increasingly serving boomers with built-up 401(k)s,” he says; with these customers, “technology exposes them to how much they don’t know.”
  • In 2018, it was stated that shares of E*Trade remained surprisingly resilient despite news of competitive advances.
  • A review of 10-K reports from 2018 and 2017 show no indications of liquidation or going out of business.
  • A review of the annual reports from 2018 and 2017 make no mention of liquidation.
  • A review of press releases from E*Trade gave no insight.