Shares of Telebanc Financial Corp. of Arlington plunged last week after the disclosure that federal thrift regulators have raised objections to the sale of the online bank to E-Trade Group Inc.
In a Securities and Exchange Commission filing, E-Trade reported that the Office of Thrift Supervision may block the transaction because the online investment firm's biggest shareholder is Softbank Corp. of Japan.
Foreign investors are prohibited from owning more than 25 percent of a U.S. bank. Softbank, which despite its name is primarily a software company, holds 26 percent of the stock in E-Trade. The two companies also have a joint venture in Japan and other interconnections.
E-Trade contends that when all the transactions are balanced out, Softbank's ownership stake is less than the limit and says it hopes to win OTS approval of the transaction.
But thrift regulators are not expected to rule on the deal before the end of the year, when the merger agreement between Telebanc and E-Trade expires. That deadline can be extended by mutual agreement, but the two companies have yet to take that step.
The acquisition of Telebanc would put E-Trade under the regulatory control of the OTS because the online brokerage would be considered a thrift holding company.
Telebanc's stock fell to $28 a share from $34.50, making it the week's biggest loser among stocks in The Washington Post-Bloomberg regional stock index. The index, which represents more than 200 companies based in the District, Maryland and Virginia, ended the week at 175.20, up slightly from 175.02 last week.
The week's big winner was ePlus Inc. of Herndon, which recently changed its name from MLC Holdings Inc. The company, which helps corporations and government agencies manage their buying of supplies, won a big contract from a Pennsylvania state agency and announced several management shifts to bolster its Internet business.