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E*Trade Financial Corporation (often styled E*TRADE) is a U.S.-based financial services company headquartered in New York. It is a holding company, the major business of which is an online discount stock brokerage service for self-directed investors. Investors can buy and sell such securities as stocks, bonds, options, mutual funds, and exchange-traded funds via electronic trading platforms or by phone. E-Trade Financial also provides investor-focused banking products, primarily sweep deposits and savings products, to retail investors.
E-Trade Financial operates directly and through numerous subsidiaries, many of which are overseen by governmental and self-regulatory organizations. The most significant subsidiaries are E*TRADE Bank, E*TRADE Securities LLC, E*TRADE Clearing LLC, G1 Execution Services, LLC (formerly known as E*TRADE Capital Markets, LLC).
On November 29, 2007, E-Trade announced a deal with Citadel LLC in which Citadel purchased E-Trade's securitized subprime mortgage investments for $800 million, cash. The transaction removed the assets with the greatest market risk from E-Trade's consolidated balance sheet¡ªtheir $3 billion asset-backed securities (ABS) portfolio, including its ABS collateralized debt obligations (CDOs) and second lien securities. This resulted in a net $2.2 billion reduction in assets on their balance sheet. In addition to that divestiture, under the terms of the deal E-Trade received $1.6 billion of capital in exchange for 12.5% senior unsecured notes and 84,687,686 shares common stock (equal to 19.99% of the then currently outstanding shares). Citadel received a seat on E-Trade Financial's Board of Directors; Mitch Caplan resigned as CEO on the same day that the deal was announced.
Although E-Trade's management admits that the deal was costly for E-Trade, it removed the risk from those subprime investments and resulted in an infusion of $2.5 billion in cash.
Prior to the subprime mortgage crisis, E-Trade's stock price had reached a 52-week high of $26.08 and had a book value (assets¨Cliabilities / number of shares outstanding) of $9.68 per share. However, on or about November 12, 2007, Citigroup analyst Prashant Bhatia suggested that E-Trade Financial could face a run on its bank operations and a bankruptcy filing, causing the stock to drop precipitously.10
After the sell-off and the Citadel deal, E-Trade's book value was $4.53 per share (a 52.2% drop), and the shares had reached a 52-week low of $3.46 per share (an 86.7% drop). Bloomberg News reported that E-Trade had lost between 1¨C2% of their deposits. Moody's reported that E-Trade saw a "17% drop in customer cash and deposits in the month of November". The company implemented a comprehensive turnaround plan at the end of 2007 which included an assessment of its organizational structure, operating expense base, and balance sheet transition, along with a customer win-back campaign.
E-Trade premiered commercials during Super Bowl XLVI featuring a talking baby in front of a web cam discussing investing and finance in an adult voice. The "insufferable brat"16 returned the next year for Super Bowl XLVII, along with a Facebook page, updates on Twitter, and videos on YouTube.17 It is a 30-second ¡°Talking Baby¡± advertisement. The E-Trade Baby demonstrates a ¡°Save It¡± initiative that focuses on just how much money is at stake in hidden 401(k) account fees and offers a better approach, ¡°come to E*TRADE, and Save It".
The E-Trade baby is voiced by comedian Pete Holmes. The campaign was created by Grey Global Group, E-Trade's advertising agency of record since 2007. The first E-Trade baby was Gregory Michael Miller, taken in March 2001.18 E-Trade Baby is an integrated advertising campaign that appears online, television, print, and social media which includes a series of Investing Solutions television commercials to highlight wide range of investing, retirement, and trading solution available at E-Trade. In 2013 the company had over 64 million total views and over 26,000 subscribers on YouTube, more than 108,000 Facebook Baby and Corporate pages fans, and more than 17,000 Twitter followers.19 On March 21, 2014, the company announced the end of the E-Trade baby via a commercial which aired during March Madness.