E-Trade and SoundView: Exclusive No More

Aug 22 2001

E-Trade has ended its exclusive distribution relationship with SoundView Technology Group.

The deal that the firms struck last year granted E-Trade customers exclusive access to IPO shares and research distributed by SoundView. That agreement is now non-exclusive.

Also as part of this restructuring, E-Trade has returned 9.3 million shares of SoundView stock, as well as warrants that would have enabled E-Trade to purchase an additional 3.8 million shares of SoundView. In addition, the original agreement would have requirerd E-Trade to pay SoundView at least $80 million if another firm acquired E-Trade; under the new terms, that fee will no longer apply.

Both firms have struggled during the market's retreat over the past year, and this restructuring will open them both up to other potential alliances.

"This new agreement continues our beneficial relationship with SoundView, while giving greater IPO access and choice to our 2.7 million customer households," said Christos Cotsakos, CEO of E-Trade, in a statement.

The news came just one day after E-Trade announced it had bought back 2.2 percent off its shares from Softbank, its largest shareholder, in a private transaction for $39 million. Softbank still owns about 17 percent of E-Trade's outstanding stock.

In a separate transaction, Christos Cotsakos purchased 2 million shares from Softbank for himself for $5.45 each. By Wednesday morning, E-Trade's stock was trading at $6.

Even though the IPO market has virtually disappeared this year, investment banks recognize that retail distribution will be important when the market returns. Earlier this summer, Goldman Sachs purchased Epoch Partners for $200 million, a significant amount considering the current market environment. By purchasing Epoch, which was backed by Charles Schwab and TD Waterhouse among others, Goldman gained access to a substantial retail customer base.