E*Trade proves to be a wise investor
By Bloomberg News
Special to CNET News.com
October 25, 1999, 1:15 p.m. PT
MENLO PARK, California--E*Trade Group has a paper gain in a group of Internet-related stocks of almost nine times its original investment.
The portfolio of the No. 2 Internet brokerage by trading volume was worth $317.8 million at September 30, compared with an original cost of $35.5 million, the Menlo Park, California-based company said in its annual report to the Securities and Exchange Commission.
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Among the companies it owns are Nasdaq market maker Knight/Trimark Group, e-mail software developer Critical Path, business network services provider Digital Island, direct marketer MessageMedia, financial services firm E-Loan, and Canadian broker Versus Technologies.
"It provides a potentially very nice source of cash, but more importantly, keeps E*Trade on the pulse of what's going on in the online financial services world," said Scott Appleby, an analyst with BancBoston Roberston Stephens.
In the past three years, technology companies such as America Online, Cisco Systems, Microsoft, and Intel have amassed minority stakes in dozens of Internet start-ups, many of which subsequently went public, as a way to learn about new products and scout possible acquisitions.
That was E*Trade's stated goal in naming Thomas Bevilacqua, a veteran Silicon Valley lawyer and deal-maker, as executive vice president of corporate development and head of its venture capital arm in March.
"E*Trade plans to continue to expand its position in relevant emerging businesses and new technology platforms to ensure we achieve our long-term vision of global leadership in electronic personal financial service," Christos M. Cotsakos, chairman and chief executive, said at the time.
E*Trade's unrealized gain on investments of $282.3 million is equal to about $1.20 for each outstanding E*Trade share, or about 5 percent of the stock price.
Total corporate investments rose sevenfold in the past fiscal year to $424 million, including stakes in closely held joint ventures, trading networks, and venture funds, according to the SEC filing. A year earlier, the portfolio was worth $59.3, and the public portion was worth $45.8 million, with an unrealized gain of $20.8 million.
E*Trade's ownership position in Archipelago, an electronic trading network, is worth $25.1 million, while its stake in E*Offering, an Internet investment bank, is worth $11.4 million, according to the filing. In January, E*Trade announced plans to take a 25-percent stake in Archipelago and 28 percent of E*Offering, though it didn't disclose financial terms.
E*Trade's joint venture stakes were worth $20.9 million, up from $10.2 million, while its venture capital investments in closely held start-ups were worth $36.3 million. Other investments rose to $10.8 million from $1.4 million.
The company sold $50.9 million of Knight/Trimark stock in February, realizing a gain of $49.9 million, according to the filing.
On September 30, the company paid 314,000 shares, worth $7.4 million, for closely held Confluent, a maker of personal calendar and organizer software. Confluent's owners could get up to 225,000 more E*Trade shares if the company meets certain unspecified goals, according to the filing.
Copyright 1999, Bloomberg L.P. All Rights Reserved. |
