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 24,787.21 135.47 0.55%
Nasdaq 6,995.34 58.76 0.85%
S&P 500 2,691.53 15.72 0.59%
Treasuries 2.39 0.03 1.44%
Data as of 1:50pm ET
Company Price Change % Change
Advanced Micro Devic... 10.92 0.62 6.07%
Bank of America Corp... 29.38 0.35 1.19%
General Electric Co 17.85 0.03 0.15%
Chesapeake Energy Co... 3.66 0.15 4.27%
Micron Technology In... 43.59 1.19 2.81%
Data as of 1:35pm ET
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.83%3.80%
15 yr fixed3.16%3.14%
5/1 ARM3.57%3.54%
30 yr refi3.79%3.79%
15 yr refi3.14%3.13%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates: