E*Trade CEO Freiberg Ousted, Broker Seeks New Leader
Stock Chart for E*TRADE Financial Corp (ETFC)
E*Trade Financial Corp. (ETFC), the brokerage that came under pressure from its biggest shareholder to seek buyers, ousted Chief Executive Officer Steven J. Freiberg and said its board is looking for a new leader.
The shares rose 6.6 percent to $8.55 as of 1:28 p.m. in New York. Freiberg, 55, was the company’s third CEO in four years. Chairman Frank J. Petrilli will hold the post while the company seeks a permanent replacement, E*Trade said in a statement. A board committee which includes the head of its biggest shareholder, Citadel LLC’s CEO Ken Griffin, will lead the search, the company said.
“This change could provide a positive catalyst,” David Chiaverini, an analyst at BMO Capital Markets, said in a note today. “E*Trade’s board may have run out of patience as the company has materially underperformed peers and financial stocks over the last two years. Frank Petrilli has the appropriate experience and background to lead E*Trade.” BMO has a “market perform” rating on the stock.
Citadel last year called on E*Trade to hire a bank to review strategic alternatives and take immediate action to maximize shareholder value after “catastrophic losses” that had driven the shares down 97 percent since 2007. E*Trade in November rejected putting the company up for sale and Petrilli joined the board in January.
E*Trade Chief Financial Officer Matthew Audette said in November that the company never contacted potential buyers as part of its strategic review. E*Trade saw “no reason to proceed down the path” of starting a sales process, he said, citing economic uncertainty and the interest-rate and credit environment in explaining why the company didn’t reach out to potential suitors.
Citadel, a Chicago-based hedge fund, invested $2.55 billion in E*Trade in November 2007 to help the company survive mortgage losses. The retail broker posted four years of losses through 2010, partly because of the subprime mortgage market collapse.
“The company recently implemented a refined business strategy, centered on strengthening the firm’s financial position,” Petrilli said today in the statement. “The board believes it is an appropriate time to transition the role of CEO to a new leader to guide the company through the next phase of its evolution.”
Freiberg joined E*Trade in March 2010, two weeks after the company said its preferred candidate was no longer a possibility. The executive came from Citigroup Inc., where he had worked for three decades.
His departure comes days after Citadel sought to acquire a stake in Knight Capital Group Inc. (KCG) The trading firm rejected a last-minute, $500 million rescue-loan offer from Citadel on Aug. 5 as it worked on a competing plan from a group of investors, said two people with knowledge of the matter.
To contact the reporter on this story: Nandini Sukumar in London at email@example.com
To contact the editor responsible for this story: Andrew Rummer at firstname.lastname@example.org
Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.