Citadel Cuts E*Trade Financial Stake to Under 10% in Share Sale

E*Trade Financial Corp. said Citadel LLC will sell shares of the online brokerage, cutting its stake to less than 10 percent, 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 percent 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 percent, and announced another 24 million in February, reducing the stake to less than 20 percent.

Shares of the brokerage fell 2.4 percent to $16.39 at 5:07 p.m. in New York. E*Trade had risen 5 percent this year, compared with the 0.5 percent 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, according to data compiled by Bloomberg. The company has posted a profit in three of the last four quarters.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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