E*Trade Names New CEO and Plans Reverse Stock Split
Online brokerage E*Trade (ETFC) executed two trades of its own Monday -- announcing that it will swap its interim CEO for a new one, and revealing plans to seek a 1-for-10 reverse stock split.
The online trading pioneer named Steven Freiberg as its new CEO effective April 1. Freiberg, a Citigroup veteran who recently served as its global consumer group co-CEO and co-chairman, will replace interim E*Trade CEO Robert Druskin, who will remain board chairman.
"The Board is delighted to welcome Steve to lead E*TRADE into its next phase of growth. Steve is an exceptional senior financial services executive who brings extensive experience in driving the strategic direction and management of a broad and diverse consumer financial services franchise," Druskin said in a statement.
E*Trade is also gearing up to ask its investors to approve a reverse stock split, when it holds its annual shareholder meeting on May 13. Investors apparently weren't all that thrilled, as E*Trade's shares were down 1.6% to $1.55 a share in morning trading while the broader markets were up.
Reverse Split Would Open Stock for More Institutional Buyers
If E*Trade were to launch its reverse split right now, investors would be holding a stock worth $15.50 for every 10 shares they previously owned.
And although that would help the struggling brokerage get above the $5 a share minimum that a number of institutional investors need in order to hold the stock because of their organizations' conservative policy requirements, some market watchers may view the reverse split as nothing but smoke and mirrors, a trick that will do little to stem price erosion over time. In addition, it reduces the number of shares floating around in the market, making liquidity to trade the shares a little more difficult.
E*Trade officials, however, have a different view.
"With 2009's successful recapitalization behind us, our permanent CEO in place on April 1, and a focus on returning to sustained profitability, we believe a reverse stock split is a logical next step for the company as we complete our financial and managerial restructuring," Druskin said in a statement. "Our board has authorized these actions and we look forward to sharing the proposal with stockholders."