One of the US' biggest hedge funds, Citadel, has agreed to pump US$2.5 billion into the troubled online brokerage ETrade to help shore up its ailing balance sheet, the firms said on Thursday.
The deal, if approved by regulators, will enable Chicago-based Citadel to amass a hefty 20 percent shareholding in ETrade, which also markets banking services.
The online broker's share price has plummeted in recent weeks as it has been forced to writedown the value of mortgage-backed securities it holds which have been hit by a lingering US housing slump and rising home foreclosures.
ETrade's stock surged after the deal was announced, but closed down 8.7 percent at US$4.82.
"The cash infusion of 2.5 billion dollars as a result of the transaction does provide much-needed support to ETrade.
However, we believe that this transaction is a transitional step toward stabilizing the business," the credit ratings agency Standard & Poor's said.
The online broker also announced chief executive Mitchell Caplan had relinquished his post and had been replaced by acting CEO R. Jarrett Lilien, who joined ETrade in 1999.
Caplan is the latest chief executive to lose his job at a financial firm amid rising losses tied to mortgage-backed securities.
"The company will conduct an executive search for the CEO position, which will include Mr Lilien and external candidates," ETrade said.
Caplan had expressed disappointment last month when ETrade revealed it made a third-quarter loss of US$58 million compared with a net profit of US$153 million in the same period of last year.
ETrade's finances slipped into the red mainly because it was forced to write down US$197 million in stressed securities.
The former CEOs of Citigroup and Merrill Lynch, Charles Prince and Stanley O'Neill respectively, stepped down in the past month.
The banks are also suffering from mortgage-related writedowns, but their multibillion-dollar losses dwarf ETrade's writeoffs.
Citigroup, the US' second-biggest financial firm, won a vast cash injection of US$7.5 billion from a United Arab Emirates investment fund earlier this week.
Although primarily known as an online brokerage, ETrade holds a substantial portfolio of mortgage-backed securities and other investments. It said Citadel will take over ownership of some of ETrade's stressed securities.
ETrade also markets mortgages, home improvement loans, savings accounts and credit cards among other financial offerings.
Under the deal, ETrade will gain immediate funding of US$2.4 billion and a remaining US$150 million by mid-January.
"The investment fortifies the company's balance sheet, allows the company to focus on its core retail business and provides additional capital to manage credit risk," ETrade said.
Citadel CEO Ken Griffin said the US$2.5 billion deal showed a strong vote of confidence in ETrade and expressed hope it would restore customer confidence in the online broker.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
US President Donald Trump yesterday announced sweeping "reciprocal tariffs" on US trading partners, including a 32 percent tax on goods from Taiwan that is set to take effect on Wednesday. At a Rose Garden event, Trump declared a 10 percent baseline tax on imports from all countries, with the White House saying it would take effect on Saturday. Countries with larger trade surpluses with the US would face higher duties beginning on Wednesday, including Taiwan (32 percent), China (34 percent), Japan (24 percent), South Korea (25 percent), Vietnam (46 percent) and Thailand (36 percent). Canada and Mexico, the two largest US trading
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary