eTrade 2011 Annual Report Download - page 153

Claims Settlement
In January 2010, a security holder paid the Company $35 million to settle a claim under Section 16(b) of the
Securities Exchange Act of 1934. Section 16(b) requires certain persons and entities whose securities trading
activities result in “short swing” profits to repay such profits to the issuer of the security. Section 16(b) liability
does not require that the security holder trade while in possession of material non-public information.
Reverse Stock Split
In the second quarter of 2010, after approval by the Company’s shareholders at the Company’s 2010 Annual
Meeting, a 1-for-10 reverse stock split of the Company’s common stock became effective. All prior periods were
adjusted to reflect the impact of the reverse stock split.
Preferred Stock
The Company has 1.0 million shares authorized in preferred stock. None were issued and outstanding at
December 31, 2011 and 2010. On March 30, 2010, the Company amended its Certificate of Incorporation to
eliminate the designation of the Series A Preferred Stock and Series B Participating Cumulative Preferred Stock.
Common Stock Offerings
In September 2009, the Company initiated and completed an At the Market Program to offer and sell up to
$150 million of common stock, in which the Company issued 8.0 million shares of common stock resulting in net
proceeds of $147 million.
In June 2009, the Company issued 50.0 million shares of common stock, par value $0.01 in a Public Equity
Offering. The Public Equity Offering resulted in net proceeds, after commissions, of $523 million. Citadel, one
of the Company’s largest stockholders, purchased approximately 9.1 million shares of the Company’s common
stock in the Public Equity Offering.
In May 2009, the Company initiated an Equity Drawdown Program to offer and sell up to $150 million of
common stock from time to time, in which the Company issued 4.1 million shares of common stock resulting in
net proceeds of $63 million. The Equity Drawdown Program was suspended in June 2009.
Debt Exchange Impact on Shareholders’ Equity
The completion of the Debt Exchange in 2009 resulted in a pre-tax non-cash charge of $968.3 million and
an increase of $707.2 million to additional paid-in capital. The net effect of the exchange to shareholders’ equity
was a reduction of $65.7 million. The increase of $707.2 million in additional paid-in capital was attributable to
the amortization of the entire premium on the newly-issued convertible debentures, which was immediately
amortized to additional paid-in capital since amortizing the premium into interest expense over the life of the
non-interest-bearing convertible debentures would have resulted in recording interest income on a liability (a
negative yield).
Cumulative Effect of the Adoption of Accounting Guidance
On April 1, 2009, the Company adopted the amended guidance for the recognition of OTTI for debt
securities. As a result of the adoption, the Company recognized a $20.2 million after-tax decrease to beginning
accumulated deficit and a corresponding offset in accumulated other comprehensive loss on the consolidated
balance sheet. This adjustment represents the after-tax difference between the impairment reported in prior
periods for securities on the consolidated balance sheet as of April 1, 2009 and the level of impairment that
would have been recorded on these same securities under the new accounting guidance.
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