Bill Cara: What's going on at Ameritrade?, Thurs., May 18, 2006, 5:50 PM

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May 18, 2006

What's going on at Ameritrade?, Thurs., May 18, 2006, 5:50 PM

John Mugarian, who writes an excellent blog, asked me a while back if I knew what was up with Ameritrade? I was aware of their purchase of the TD Waterhouse business, but I could not understand why that deal would be such a negative driver on the AMTD share price, so I had to say to John that I found the whole thing strange.

I mean the stock is in a drastic decline, and CEO Joe Moglia is selling millions of shares at very low prices, and he's all over the TV networks like white on rice.

Something's up.

So I looked into the insider buys/sells, and lo and behold I find the purchase of AMTD by TD Bank to be a stunning number. I also find the insider sells by Moglia and by his two Executive VP's (COO and General Counsel) at the same time and (low) price to be remarkable.

The average daily volume is just 6.7 million shares, and TD is buying about half! So, with all this buying by TD, how is it that the stock is cratering, and the three senior executives deciding that this is the precisely best time to "arrange estate planning"?

Anyway, somebody tell me what's going down here because I can't figure it out except for the obvious, which is that the whole deal between TD and the Ricketts family may not have been fully disclosed.

Posted by Posted by Bill Cara on May 18, 2006 05:50:43 PM | Category: 40 Financials

Discourse

Below is excerpt from Scotia Capital's equity research, dated May 18, 2006:

TD - Increases Ownership of TD Ameritrade to 37.5% from 32.5% at Deal Close - Retains Board Seat

â– TD invested a further US$263 million in AMTD, purchasing 12.9 million shares at an average price of US$20.42 per share and increasing its ownership to 34.6% from 33.4%. Subsequent to the second quarter (ending April 30th) TD invested a further US$326 million (as at May 15) purchasing 17.4 million shares at an average share price of US$18.70 per share, increasing its ownership to 37.5%.

â– TD Bank announced February 22, 2006 that it intends to purchase up to 15 million or 2.5% of AMTD stock by August 15, 2006 and that it aims to own 37.5% of AMTD by January 2007. TD has already purchased, as at May 15, 2006, 30.3 million shares since closing for US$589 million or US$19.43 per share. This brings its ownership up to 37.5%, well ahead of January 2007, which allows it to keep the one board seat.

Posted by: Claire at May 18, 2006 6:25 PM [link]

You're missing out on traffic from Google Finance. Look at the blog posts for AMTD on google.com/finance and you'll see what I'm talking about. Check it sometime after 8:30pm eastern time.

Posted by: Sailor Jake at May 18, 2006 7:55 PM [link]

What I want to know is whats going on with TRAD ?
Consistent earnings growth - 84 % for 1st quarter yet, stock price is down 25% from its peak in February. Does anyone see a bottom ?

Posted by: TheAdonis at May 18, 2006 9:10 PM [link]

http://stockcharts.com/def/servlet/SC.web?c=$XBD,uu[w,a]daclniay[dd][pb22!b65!f][vc60][iut!Ul14!La12,26,9]&pref=G
Brokerage index is crashing along with the financial index(Bill is happy after being short XLF for quite a while :))
Short term bullish on the USD... EUR/USD 1.2750 GBP/USD 1.8725, USD/CHF 1.2205 etc etc May exacerbate weakness in metals and oil.

Posted by: FirstConsul at May 19, 2006 5:52 AM [link]

Bill, there was a $6 special dividend. The stock is doing just fine after you factor that in!

Posted by: AA at May 19, 2006 4:38 PM [link]