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Only two things makes stocks & Bonds Surge

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August 31, 2009 – Comments (0) | RELATED TICKERS: ETFC

Either drastically improved performance at the company or a buyout is coming.

I am talking about ETFC and judging from the  financials the later may prove to be correct.

 

UPDATE 2-Citadel ends plan to sell E*Trade sharesBy: AFX | 31 Aug 2009 | 12:40 PM ET http://www.cnbc.com/id/32628814/site/14081545/for/cnbc/

By Joseph A. Giannone NEW YORK, Aug 31 (Reuters) - Hedge fund firm Citadel Investment Group LLC reversed course Monday, canceling plans to cut its stake in hard-hit online brokerage E*Trade Financial Corp by about 10 percent. News that E*Trade's largest stock and bond holder would not sell 120 million shares into the market over the next three months sent E*Trade stock surging as much as 18 percent. "Citadel believes that the termination of the plan at this time is in the best interests of E*Trade and all of its stakeholders," the firm said in a statement. A spokeswoman for the firm declined to comment further. Chicago-based Citadel announced the plan on Aug. 11; no shares were sold. Citadel, whose chief executive, Kenneth Griffin, sits on E*Trade's board, caused a stir earlier this month when it revelaed plans to sell 120 million shares, or two-thirds of the 166 million it held. Analysts speculated it was an effort to reduce exposure to a brokerage that continued to face losses from its mortgage business. Citadel on Monday played down the stock-sale plan, noting 120 million shares represents a little more than 10 percent of its total E*Trade holdings of 1.16 billion shares -- common stock plus convertibles. The hedge fund giant also holds $850 million in straight E*Trade debt. Meanwhile, people familiar with the firm say Citadel's E*Trade investment overall has been profitable. E*Trade stock is down 61 percent since Citadel announced a rescue of the broker in November 2007, investing $1.85 billion in E*Trade stock, debt and other assets. The shares have surged 28 percent since June, when a second round of financing was unveiled. Yet the bulk of Citadel's investment was in E*Trade bonds, which have surged in value. E*Trade shares were up 15 cents to $1.79 in midday trade on Nasdaq after rising as high as $1.94 earlier in the session. MORE THAN HALF The persistence of heavy credit losses at E*Trade's mortgage business earlier this year prompted Citadel to inject new capital and restructure its holdings. In June, the hedge fund bought $100 million out of a $400 million E*Trade stock offering. Recently it swapped most of its E*Trade debt for convertible securities as part of a broader bond swap that slashed E*Trade's debt load and borrowing costs. These moves supplied much-needed capital and slashed E*Trade's borrowing costs, but they placed Citadel in a tricky spot. U.S. laws say investors holding more than 25 percent of a bank or thrift are considered holding companies subject to strict federal banking oversight -- something Citadel would like to avoid. Including the June purchases, Citadel holds 14.9 percent of E*Trade's stock. That ownership stake would soar to 55 percent if Citadel, but no other debtholders, exchanged all of its convertible debt. If all E*Trade debtholders exchanged their convertible debt, Citadel's stake would be 41.5 percent. The announcement of the canceled stock sale plan comes a little more than two weeks after the U.S. Office of Thrift Supervision, which oversees E*Trade's savings bank and mortgage business, halted a proposal that would have sent nearly all of its customer trades through a Citadel market-making unit. Yet OTS granted an important concession to Citadel: It agreed to let the hedge fund firm own more than 25 percent of E*Trade and not be deemed a holding company. Citadel accepted the placement of "blockers" on the debt, which means the convertibles cannot be exchanged by Citadel. (Reporting by Joseph A. Giannone, editing by Maureen Bavdek and John Wallace) ((joseph.giannone@thomsonreuters.com; +1 646 223 6184; Reuters Messaging: joseph.giannone.reuters.com@reuters.net )) Keywords: ETRADE CITADEL/ (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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