Shares of Telebanc (Nasdaq: TBFC) soared more than 12 percent, climbing 8 points to 74-1/2, on Tuesday after online broker E*Trade (Nasdaq: EGRP) announced that it would buy the online bank for approximately $1.8 billion in stock. After the gain on Tuesday, Telebanc’s market capitalization is at around $1.2 billion, which means shareholders of Telebanc are getting a nice premium.
The move is significant because it is the first merger of an online bank and an online broker, and the deal will create the first financial services company that is a pure Internet play. Shares of E*Trade were down almost 12 percent, falling 5-3/16 to 39-5/16, on Tuesday partially because investors are concerned about competition from Merrill Lynch’s new online trading service. However, the deal to buy Telebanc is a good one and certainly makes E*Trade’s future more secure.