Citadel slashes stake in E*Trade

Kenneth Griffin's hedge fund cuts holding from 27% to under 20%; hedgie injected $2.6B into brokerage three years ago
FEB 24, 2011
E*Trade Financial Corp. said Citadel LLC is reducing its stake to less than 20 percent three years after the hedge-fund operator injected capital to help the online brokerage avoid bankruptcy. The stock fell. The sale of 23.95 million shares through Goldman Sachs Group Inc. was priced at $16, according to data compiled by Bloomberg. Deal settlement will occur on Feb. 28, the data show. Citadel was the seller, and New York-based E*Trade won't receive any proceeds, according to a statement yesterday. The hedge fund had held 21.8 million shares and debentures convertible into stock, giving it about 27 percent ownership of E*Trade, according to a Securities and Exchange Commission filing from E*Trade on Feb. 22 and another from Citadel on Feb. 14. 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, cutting its stake from 33.2 percent. Shares of the brokerage fell 4.8 percent, the most since Aug. 11, to $15.85 at the end of trading on Thursday. E*Trade has dropped 0.9 percent this year, compared with the 1.9 percent gain by the NYSE Arca Securities Broker/Dealer Index of 11 companies. Citadel's ownership drops to 19.7 percent after the offering, Susan Hickey, a spokeswoman for E*Trade, said in an e- mail yesterday. That doesn't factor in the 3.59 million shares Goldman Sachs may acquire as underwriter, she said. Devon Spurgeon, a Citadel spokeswoman, declined to comment. E*Trade, the fourth-largest U.S. retail brokerage by client assets, reported a fourth-quarter loss of 11 cents a share last month, missing the 4-cent average profit estimate from analysts surveyed by Bloomberg. E*Trade had posted two straight quarters of net income following almost three years of losses. 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. --Bloomberg News

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