Retail brokerages are again finding themselves under intense pressure to consolidate. Yesterday, two hedge fund controlling 8.4% of
TD Ameritrade (NDAQ:AMTD) urged the company to explore the possibility of a merger with E*Trade or Schwab, which jumped the price more than 6%.
The company revealed a regulatory filing that the two hedge funds had requested regulatory approval to acquire more shares. The hedge funds said they believe TD Ameritrade could drastically increase its long-term shareholder value through a business combination with E*Trade or Schwab.
Any transaction would give the company greater scale and potentially reduce expenses through the economies of scale effect; however, there are many barriers that stand in the way. The most notable is Toronto-Dominion Bank, which controls 40% of the company's shares and has already spoken out against any acquisition in favor of an oganic growth strategy. The company's CEO did note, however, that the company continues to evaluate its options. Combined, this is certainly a
stock to watch!
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