E*Trade shares climb; BofA to write down $3 billion in debt; Caribou Coffee management shifts

By Sheri Kasprzak

New York, Nov. 13 - Shares of E*Trade Financial Corp. rose on Tuesday despite diving by more than 50% Monday on news that the company will sustain major writedowns and that the prospects for the future remain uncertain given ratings agency downgrades.

Shares of E*Trade on Tuesday climbed 40.85%, partially recovering the losses of the day before.

Even so, traders aren't so positive it will stay that way.

"Let's face it, we know it's bad, we just don't know how bad yet," said one sellside trader. "Investors hate uncertainty and when you basically say, we don't know what's going to happen but we know it's probably not going to be good, your stock is more than likely going to slide. I don't know if I'd put the bank on their chance of filing for bankruptcy. My guess would probably be no."

An analyst Monday put E*Trade's odds of filing for bankruptcy at 15%.

"I don't think they're going to file for bankruptcy," asserted another analyst when told about the odds put forth Monday.

"I think their stock is probably in trouble. I think it's going to take a lot of work to put it right again. I think there will be belt-tightening and restructuring and the sale of assets, but I don't think they'll file for bankruptcy."

On Monday, E*Trade's stock fell by 58.67%, or $5.04, to end the day at $3.55 (Nasdaq: ETFC). The stock gained $1.45, or 40.85%, on Tuesday to close at $5.00. The stock slid by 9 cents after the market closed.

The company said the fair value of its asset-backed portfolio has been negatively impacted by industry-wide rating agency downgrades.

"Writedowns are a way of life," said one sellside trader on Monday. "In this market, it really isn't surprising. I think most banks are going to have to suffer for a while."

BofA to make $3 billion in writedowns

Just a day after E*Trade made its announcement of planned writedowns, Bank of America Corp. said it will be forced to take $3 billion in writedowns in the fourth quarter.

"Obviously, it's not just [Bank of America]," said one analyst Tuesday. "They're [writedowns] ubiquitous. It's everywhere, and it's going to take time to get the mess fixed."

BofA said last week that it expected writedowns but had not specified to what extent until Tuesday. In addition to the $3 billion writedown news, Bank of America said its losses could grow given the continued fallout from the mortgage crisis most banks find themselves grappling with.

Shares of BofA were up $2.29, or 5.21%, to close at $46.27 (NYSE: BAC) on Tuesday, despite the news.

Caribou shifts management around

Elsewhere, Caribou Coffee Co., Inc.'s management got a shakeup on Tuesday when chief executive officer Michael J. Coles stepped down.

Shares of Caribou closed up 7 cents on Tuesday after trading in a range of $5.11 and $5.30. The stock closed at $5.22 (Nasdaq: CBOU).

Rosalyn T. Mallet has taken over as interim chief executive officer, and Gary A. Graves was named as the non-executive chairman of the board. Graves is an independent board member and Mallet was previously the company's chief operating officer.

"This type of move is pretty typical around earnings season," said one sellside trader. "Not surprising. You get results you're not happy with so you move people around. It happens."

"The past five years have been a very exciting time for me at Caribou," said Coles in a statement.

"It is now time to step aside and let a new CEO take the company through its next phase of growth. As a member of the board, I look forward to working with both the new chairman and CEO."

Minneapolis-based Caribou is the country's second-largest gourmet coffeehouse operator.

Shares of Sirius climb

Sirius Satellite Radio Inc.'s shareholders voted to approve its planned merger with XM Satellite Radio Holdings Inc.

Sirius' stock climbed by 22 cents on Tuesday to end at $3.63 (Nasdaq: SIRI). Shares of XM Satellite jumped by almost 9.7%, or $1.33, to end at $15.06 (Nasdaq: XMSR).

The merger ran into a snag earlier this year when the Federal Trade Commission brought up possible antitrust issues. Those matters have since been resolved.

"We are pleased with the outcome of today's vote," said Mel Karmazin, Sirius's CEO, in a statement.

"The approval by Sirius stockholders of our merger with XM represents a significant step in the approval process, and on behalf of the board and management team, I want to thank our stockholders for their continued support. We look forward to completing the merger by the end of the year and, together with XM, becoming an even stronger competitor in the ever-expanding audio entertainment marketplace offering consumers more choices at lower prices."

In the merger, XM shareholders will receive 4.6 shares of Sirius for every share of XM held.

Royal Dutch Shell unit to simplify structure

Shares of Royal Dutch Shell plc were off on Tuesday even as the company said its subsidiary, Shell Energy North America (US) LP, will simplify its corporate structure by merging into Shell Energy North America.

The stock closed down 39p to end at 1,938p on Tuesday (London: RDSA).

The merger is set to close in 2008 and impacts Coral Energy Resources, LP; Coral Power, LLC; Coral Energy Management, LLC; and Coral Gas Marketing, LLC.

"Our commitment to customer service includes making our systems and processes easier, more efficient and user friendly," said Mark Hanafin, Shell Energy North America's CEO, in a statement.

"This merger will help accomplish that by clearly illustrating our relationship to Shell and the Shell brand and eliminating confusion caused by multiple operating companies with multiple names."

Houston-based Shell Energy North America is an oil and natural gas distribution company.

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