Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

E*Trade's biggest investor wants to sell the company

July 20, 2011: 1:27 PM ET
etrade-baby.top.jpg

E*Trade, known for its Super Bowl commercials starring a talking baby, is one of the most popular online brokerage firms but has seen its stock decline 94% over the last five years.

NEW YORK (CNNMoney) -- The E*Trade baby may soon have a reason to stop crying.

E*Trade Financial (ETFC) shares surged more than 15% Wednesday, after the company's largest shareholder publicly urged a possible sale of the company.

Citadel, the hedge fund that owns a 9.8% stake in the company, sent E*Trade a letter filed with the Securities and Exchange Commission, requesting a special shareholder meeting to discuss strategic alternatives, including a sale of the company.

Citadel is basically fed up after E*Trade posted four years of losses and saw its stock decline 94% over the last five years.

"The facts speak for themselves -- stunning losses from the Company, catastrophic losses for the shareholders," the letter said. "This is the story of E*Trade's poor management decisions."

Citadel cited toxic mortgage-backed securities as weighing on the company, and specifically called for the removal of Michael Parks and Donna Weaver from the company's board.

Stocks: Investors sidelined by debt debate

The letter claims that five of E*Trade's board members received $7 million in compensation, while presiding over the company's mortgage investment strategy and costing the company millions in losses.

E*Trade is the third largest publicly traded online brokerage firm, behind Charles Schwab (SCHW, Fortune 500) and TD Ameritrade (AMTD).

While E*Trade's brokerage business is strong, its $15.8 billion loan portfolio -- which includes mortgages and home equity loans -- remains a challenge for the company.

"The brokerage business is clearly attractive here, but if you buy the company, it comes with a loan portfolio with question marks around it," said Chris Allen, senior analyst with Evercore Partners.

Citadel's letter brings a new protagonist to drive change in the company, Allen said, but whether that can translate into shareholder value still remains to be seen.

E*Trade is Citadel's largest holding after its stock in Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500).

E*Trade declined to comment on this story. To top of page

Index Last Change % Change
Dow 18,339.24 110.94 0.61%
Nasdaq 5,318.55 12.84 0.24%
S&P 500 2,171.37 11.44 0.53%
Treasuries 1.57 0.01 0.71%
Data as of 3:54am ET
Company Price Change % Change
Procter & Gamble Co 89.46 1.10 1.24%
Bank of America Corp... 15.38 0.09 0.59%
Chesapeake Energy Co... 6.75 0.52 8.35%
Transocean Ltd 10.02 0.60 6.37%
Micron Technology In... 17.44 -0.56 -3.11%
Data as of Sep 28
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.34%3.51%
15 yr fixed2.63%2.69%
5/1 ARM2.91%2.97%
30 yr refi3.35%3.52%
15 yr refi2.63%2.72%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates: