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If anybody bothered to do their homework, you would have read in the S-4 that the fee is due if TBFC agrees to sell to a 3rd party rather than E Group.
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If this is so, and I agree that it is, AND from other sources we know that:

1) TBFC is worth more per share than EGRP due to better earnings and growth prospects. (Therefore if the merger does not go through then TBFC shares benefit); and

2) EGRP recognized this as they offered approximately 1.05 shrs of EGRP for each 1 of TBFC. (Therefore if the merger does go through TBFC shares benefit, given the stock price now)


Can anyone help me understand this inconsistency???

(Someday I want to be) IDLERICH
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To Idlerich:

1. Not everyone would agree that TBFC is worth more per share than EGRP.

a. For those who believe that brand recognition is king, EGRP is in a good position to survive the inevitable consolidation of online brokerages and end up at or near the top. They even gained market share on Schwab in October, and I believe they kept their total number of trades flat in a month when everyone else dropped. They also add new accounts at a relatively low cost, which is surprising considering how much advertising they do.
TBFC, on the other hand, has just begun advertising (at least here in NYC, where the world begins and ends -- that was a joke) and is probably best known as the company that is now probably not going to merge with EGRP.

b. It is less clear to the investing community that online banks such as TBFC and NTBK are going to muscle into the territory of Citicorp, etc, in the way that the online brokers have with the traditional brokerage community. This skepticism does make sense, at least on one level. People may be annoyed (will always be annoyed) at the high fees their banks charge them and low interest rates they offer on savings accounts, but the difference between the online banks and regular banks is nowhere near the spread in fees (and account services) between online brokers and traditional brokers.

2. The street obviously believes the merger will not go through, because the spread is widening day by day, irrespective of the direction of the market.
The street doesn't like uncertainty. Failed mergers reflect badly on management, whether or not the judgment is deserved.

Having said that, I"m long 200 shares in TBFC, bought almost a year ago at 16.25. I'm considering buying more, because if the merger does go through it's obviously undervalued by 30%, and I think it's a worthwhile risk. I was actually disappointed at the merger announcement, not that I dislike EGRP.
The TBFC spike to 75 in April was a bit nuts, but growth in the last quarter and looking forward does look promising, and you could expect positive momentum at some point.

I"m gonna do some research on NTBK, one of TBFC's competitors. If it looks comparitively undervalued I'm gonna add another 100 shares or so.

Thing is, if the merger does fail, you gotta be ready for a big tank. 15, anyone?

I can't do my NTBK research until the weekend, but would love to decide before close. If anyone's done this already I'd love to hear the results. You have two hours.

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This week has been very weird for TBFC, and I have not done the research to even attempt to explain the 6-point spread on Friday between TBFC and EGRP.

However, I think there's a chance the merger will still go through. I also believe TBFC is undervalued. With that in mind, I purchased additional shares on Friday. I'm already long 300 shares in TBFC at a split-adjusted 12.50.

Depending on what ratios/numbers you review, TBFC looks like a better investment than Netbank.

But what do I know. I'm a Fool. :-)

Well, I guess we'll find out this week.
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