Monday, May 09, 2005 - E*Trade AMTD Buyout

ETrade offered 5.5 Billion for AMTD and the stock has responded. The market cap of AMTD is now about 5.5 Billion. My guess is that AMTD will want at least two or three more dollars per share but there is risk in buying now. One is that AMTD will buy TD Waterhouse. The AMTD founding family has enough shares to possibly block a take over.

Holding more shares in AMTD than in ET means that my family is routing for a high final price. We hope to receive shares in a tax free exchange as we have more than 400% profit.

The president of AMTD has indicated that he is willing to step aside if the family wants to sell to ET. It is another fun day because AMTD is one of my families largest core holdings. Three days ago, the prevailing attitude was the brokers won't do well until the price war stops. Suddenly, ET and AMTD have moved up boosting our main account to very close to its all time high.

Morningstar ranks AMTD with only 1 star and it offers a price target of $9. Don't you love price targets and recommendations as posted by analyst? It is impossible for them to be consistently right on the money.

Morningstar reports that AMTD is an extremely efficient processor or trades, it can handle 350,000 client trades per day and it has 3.6 million accounts. The company makes 75% of its income off transactions and 25% off net interest income. The beauty is that consolidations in this industry leads to economic savings a portion of which are passed along to consumers.

ET is the more diversified company.