E*Trade's Meltdown

The stock price gets slashed in half after the online brokerage says it can't predict new credit losses and an analyst mentions the possibility of bankruptcy. Will customers stick around?

by Ben Steverman

It went from bad to worse for E*Trade Financial (ETFC) on Nov. 12. First, the company said the fair value of its $3 billion asset-backed securities portfolio had deteriorated further since Sept. 30, resulting in larger-than-expected write-downs. Thanks to rating agency downgrades and more problems in the credit markets, the company says it can't stick by its previous earnings predictions.

Then, Citigroup (C) analyst Prashant Bhatia poured salt on the wounds on Nov. 12 by placing the probability of bankruptcy for E* Trade at 15%. He worried that the recent news would cause customers to pull their money out of E*Trade bank accounts. That would create a classic "run on the bank" scenario and could force E*Trade to sell its assets to give customers back their cash.

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http://www.businessweek.com/investor/content/nov2007/

Go ahead and sell idiots! I will probably stock up on some shares. Wonder why people always sell when the stock prices go DOWN.

Looks like TD AmeriTrade or Chuck S will buy them out