The Wall Street Journal has a great piece dissecting how the E*Trade deal got done starting from Citadel losing money on their equity position as it was collapsing. …
On Monday, Nov. 12, Kenneth Griffin was
boarding a plane to New York when he received an urgent call from Joe Russell, a
lieutenant at Mr. Griffin’s big hedge fund, Citadel Investment Group. Shares of
online broker E*Trade Financial Corp. were plunging in value, and Citadel, a
holder of E*Trade shares and debt, was losing money rapidly."We need to focus on this fast,"
said Mr. Russell, Citadel’s head of credit investments, relaying word that an
analyst report suggesting possible bankruptcy had sent shares of E*Trade
reeling."Let’s go," Mr. Griffin shot
back, as he authorized a plan to begin buying up millions of shares of E*Trade.
The next morning, Mr. Griffin and his team reached out to E*Trade, hoping to
inject money directly into the company. Mr. Griffin was sensing that he could
profit from a recovery at E*Trade and the overall financial markets, which have
been in turmoil since the summer.Late Wednesday night, a deal was reached to
invest $2.55 billion into E*Trade, which is best known as a discount brokerage
firm but also runs a federal savings and loan. That unit’s ventures into
mortgage securities have taken a devastating toll, sinking E*Trade’s stock to
78% below its price at the start of the year. The stock closed yesterday in
Nasdaq Stock Market trading at $4.82 a share, down 46 cents…..
Why Citadel Pounced On Wounded E*Trade – WSJ
Tags: Citadel, Credit Crunch
