Saturday, June 25, 2005

On Ameritrade / TD merger

Ameritrade announced it is buying TD Waterhouse, after ETrade rejected its offer. The Ameritrade/TD combine is surely better than a Ameritrade/ETrade union.

The Ameritrade deal involves a one-time dividend payout to Ameritrade shareholders. This may be good for short term shareholders, but the debt-funded dividend is a bad idea in the long run.

After this merger, ETrade definitely will be looking at other partners. A Schwab/ETrade merger may be in the offing. Such a merger will be good for both shareholders, with Schwab's trust business and ETrade's banking/mortgage providing sufficient diversification.

Smaller players like OptionsExpress (OXPS), Knight Capital Group (NITE), TradeStation (TRAD), Siebert (SIEB) will also be eyed by both Schwab (SCH) and ETrade (ET).


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