These days, Ameritrade
Apparently, Ameritrade meant what it said, which results in the latest hot brokerage hookup rumors. Today, the Financial Times reported that Ameritrade was in talks with Toronto-Dominion Bank
Shareholders bid up both firms today, clearly convinced that some kind of merger and acquisition action is on the horizon, whether it be this deal or another. Some are even suggesting that E*Trade will make a richer offer for Ameritrade.
If the TD Waterhouse deal goes through, and assuming Ameritrade would be the controlling survivor, it would nearly double the firm's current 3.7 million client base.
But at what cost? And what benefit? Analysts are putting a price tag in the range of $2 billion to $3 billion on a possible transaction and throwing out numbers like $620 million as estimates of savings through synergy. Let's hope so, because the trading biz ain't what it used to be. Ameritrade reported that April trading volumes had dropped 30% and lowered its guidance based on the shortfall. And things have been going the same direction at Waterhouse, which recently reported a 16% decline in trading volume.
While the current climate is rewarding investors handsomely, Foolish investors might remember the old saw about being careful what you wish for, in case you actually get it. In the end, this is still an industry where revenues and earnings cycle with fickle investor sentiment and where pricing is going to continue to drop as time goes on. Buy the business accordingly.
For related Foolishness:
- Ameritrade puts on its stalwart, independent stance.
- The original invitation to tango.
- Schwab gets some law and order.