Citadel cuts E*Trade stake to under 10%

E*Trade Financial Corp. said Citadel LLC will sell shares of the online brokerage, cutting its stake to less than 10%, after it sold almost 24 million shares less than two months ago. Citadel, the hedge-fund operator that injected capital to help E*Trade avoid bankruptcy three years ago, plans to sell 27.5 million shares through Morgan Stanley, according to an E*Trade statement today. E*Trade won't receive any proceeds. The offering is set to close on about April 29. The hedge fund will have an almost 10% ownership stake after the sale, according to Susan Hickey, a spokeswoman for E*Trade. Kenneth Griffin, the founder of Chicago-based Citadel, joined E*Trade's board in June 2009. The money manager sold 170 million shares in April 2009, cutting its stake from 33.2%, and announced another 24 million in February, reducing the stake to less than 20%. Shares of the brokerage fell 2.4% to $16.39 at 5:07 p.m. in New York. E*Trade had risen 5% this year, compared with the 0.5% loss by the NYSE Arca Securities Broker/Dealer Index of 11 companies. E*Trade got a $2.55 billion cash infusion from Citadel in November 2007 to help it weather losses from bad loans and shore up its banking unit. The New York-based company on April 20 posted quarterly earnings and sales that exceeded the average analyst estimate and has posted a profit in three of the last four quarters. --Bloomberg News--