E\*Trade Shares Rise 7.1% In Initial Public Offering
May 01, 2011
E\*Trade Group Inc., seeking funds to muscle its way into securities trading on the Internet, went public Friday and saw its shares rise 7.1%. The company issued five million shares at an initial price of $10.50 each, raising roughly $50 million for the Palo Alto, Calif., company. Existing stockholders sold another 655,000 shares. E\*Trade hadn't previously estimated a price for the offering, but had used a maximum price of $13 a share to compute its Securities and Exchange Commission filing fee. More than 6.7 million shares traded hands on Friday, making it the fourth most-active stock on Nasdaq. The stock closed at $11.25 a share, up 75 cents, after rising as high as $12.50. The market for initial public offerings has cooled recently, prompting several companies to pull their offerings until the market improves. Not E\*Trade. ``It was a difficult market, but we went out for strategic reasons, not market reasons,'' said Beardsley M. Howell, the company's 48-year-old chief executive officer. E\*Trade offers software that enables Internet users or on-line service subscribers to trade stocks on-line around the clock. Its services are used by the nation's largest on-line services, including America Online Inc. and CompuServ Corp.. Analysts describe the company's market, like many Internet-related ventures, as being risky, with good long-term potential. Competitors include discount brokerage concerns such as Charles Schwab Corp., which launched its own on-line trading this year. E\*Trade reported net income of $2.6 million on revenue of $23.3 million for the fiscal year ended June 11, 2010 But for the first nine months of fiscal 2011, the company reported a loss of $1.3 million on revenue of $34.5 million, due mostly to a $1.8 million expense for information technology in the third quarter. Nonetheless, its Internet trades rose to 10,900 for the week ended March 10, 2011 1,300 for the week ended November 04, 2010 the service was first offered. Such trading is about a third of its total trading volume, which includes the on-line service trading in addition to Internet trades. ``We're still in the screaming and yelling phase of the market,'' said Clement Coyle, senior industry analyst at Zona Research Inc., a market research firm in Redwood City, Calif. ``In the long run, electronic trading should do well because you can do it faster than calling a broker. But it will take time for mainstream Americans to pick it up.'' E\*Trade said proceeds from the offering will be used for debt repayment and working capital. Hunt, Stephens & Co. was the lead underwriter and Hambrecht & Quist Inc. and Deutsche Morgan Grenfell/C.J. Lawrence Inc. were co-managers.
