• 20 Jul 2011 at 12:28 PM

Citadel: E*Trade Would Be Better Off Without Mortgage Losses, Board, Independent Existence

By Matt Levine

After a good first half, Citadel is getting so close to its high-water mark that Ken Griffin is starting to reminisce about the good old days when he used to earn performance fees. That in turn reminds him of what else he was up to back in those care-free pre-crash times, like sinking $2.5 billion into an online brokerage saddled with a disastrous mortgage lending operation in November 2007.

And so today he decided to catch up with E*Trade Financial, where he’s the largest shareholder after leading a rescue in 2007. But what started as a nice note to the CEO quickly turned ugly.

E*TRADE is one of the most recognized and popular online brokerage firms in the industry. It consistently receives high marks for its trading platform, customer service and usability, and has benefited from strong customer loyalty. Yet, despite a powerful brand and excellent products, under the stewardship of E*TRADE’s Board the Company has lost money every year since 2006. The stock has declined a stunning 94% over the last five years, destroying more than $9 billion in stockholder value.

Specific complaints include that E*Trade failed to raise capital while markets were open, leading to a regulator-mandated highly dilutive equity raise in June 2009. Citadel also doesn’t like the staggered board, of which half the directors “share the remarkable distinction of having presided over the Company’s catastrophic mortgage loan investment strategy.”

The bottom line:

E*TRADE’s Board must take immediate action to consider how best to maximize shareholder value. We urge the Board to retain qualified, independent and unconflicted financial advisors to explore strategic opportunities in the interest of increasing shareholder value. We believe a sale of the Company could be achieved promptly and generate significantly higher shareholder value, avoiding the risks of operating as an independent company lacking leadership and financial capabilities.

Citadel also wants to de-stagger the board and replace outgoing directors with “qualified, independent, objective candidates who are not tainted by the Company’s past and ongoing management failures.”

ETFC is up about so far today, meaning Citadel made about $110 million with their letter.

Citadel Assails E*Trade and Calls for a Sale [Dealbook]
Letter from Citadel to Steven J. Freiberg [SEC]

Comments (22)

  1. 1
    Posted by Anonymous | July 20, 2011 at 4:33 PM

    I’d hit it.nn- DSK

  2. 2
    Posted by Guest | July 20, 2011 at 4:44 PM

    You better watch your back.nn-J Epstein

  3. 3
    Posted by Karl Mozurkewich | July 20, 2011 at 4:51 PM

    Why don’t you just have a seat over there…..nn-C. Hansen

  4. 4
    Posted by Randall | July 20, 2011 at 4:53 PM

    All you fuckers better keep your hands off my Doris.nnu00a0- Krugmannnhttp://krugman.blogs.nytimes.com/2007/10/11/my-cat-wins/

  5. 5
    Posted by Guest | July 20, 2011 at 4:56 PM

    Babies areu00a0God’s miracle. After he turns 5 he belongs to us.nn- Boston Archdiocese.

  6. 6
    Posted by Anonymous | July 20, 2011 at 4:58 PM

    Check out nwww.collegehumor.com/video/6477219/remix-e-trade-baby-loses-everythingnnfor an awesome e-trade baby vid. Might be NSF…the little dude cusses a bit

  7. 7
    Posted by InfiniteGuest | July 20, 2011 at 5:03 PM

    Sounds like somebody needs a milkshake.

  8. 8
    Posted by guest | July 20, 2011 at 5:09 PM

    u00a0What’s a high water mark?u00a0 The dirt ring left in the tub after Wilbur’s bath?nn- Phil F

  9. 9
    Posted by guest | July 20, 2011 at 5:10 PM

    u00a0Citadel should do itself a favor and puke ETFC stock like a milkaholic on a bender

  10. 10
    Posted by PMCOsucks | July 20, 2011 at 5:16 PM

    “ETFC is up about so far today”n-grammar inspectorn

  11. 11
    Posted by Tit For Tat | July 20, 2011 at 5:21 PM

    E*Trade: Citadel would be better off without that fucking crack in its sidewalk.u00a0 Lawsuits are expensive.

  12. 12
    Posted by Gozer | July 20, 2011 at 5:22 PM

    What do you throw a drowning E*Trade baby? Its severed arms.

  13. 13
    Posted by Wahoo | July 20, 2011 at 5:22 PM

    Milk steak? I’m in.nn- Charlie

  14. 14
    Posted by PasteSpecialFormats | July 20, 2011 at 5:38 PM

    I’ll take the Penis Mightier for $2000, Trebeck.

  15. 15
    Posted by PMCOsucks_sucksbigtime | July 20, 2011 at 5:40 PM

    You are a moron…GFY

  16. 16
    Posted by Wahoosucks | July 20, 2011 at 5:41 PM

    Kill yourself…you’re an idiot

  17. 17
    Posted by PMCOsucks_sucksbigtime_sucks | July 20, 2011 at 5:43 PM

    How so?

  18. 18
    Posted by Wahoo | July 20, 2011 at 5:48 PM

    Slow day in client services?

  19. 19
    Posted by Anonymous | July 20, 2011 at 5:51 PM

    Please, do *anything* to it, just get rid of those f***ing annoying ads with the talking brat.

  20. 20
    Posted by LiLo | July 20, 2011 at 7:15 PM

    I hate those talking baby ads!

  21. 21
    Posted by Anonymous | July 20, 2011 at 7:39 PM

    Nah. He had lots of trade breaks to reconcile for the back office manager.

  22. 22
    Posted by maryjonelam | December 16, 2011 at 6:43 PM

    I am glad to here the all useful inforamtion

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