On Monday, E*TRADE Financial Corporation (ETFC) announced that it has chosen the ex-chief executive of Citigroup Inc. (C), Steven Freiberg, 53, as its new Chief Executive Officer (CEO), effective Apr 1, 2010. Steven Freiberg comes with a 30-year valued experience at Citigroup and succeeds interim CEO Robert Druskin.
With an exceptional financial service expertise and extensive experience of moving strategically and managing a broad and diverse consumer financial services franchise, Steven is expected to add value and help drive momentum for ETFC’s future growth and profitability.
Concurrently, the board of ETFC has also approved a 1-for-10 reverse stock split in order to decrease the company’s authorized common stock to a total of 400,000,000 shares. Accordingly, in a 1-for-10 reverse split, a shareholder will receive one-tenth the quantity of shares, but at ten times the price. However, the final decision awaits the shareholders approval at the company’s annual meeting that is to be held on May 13, 2010.
Post the successful recapitalization in 2009, ETFC seeks reverse stock split to complete its financial restructuring. Reverse stock split is primarily a reduction in the number of shares outstanding that increases the par value of a company’s stock or its earnings per share (EPS). However, the market value of the total number of shares (market capitalization) remains the same. Conversely, this increase in EPS or unaffected market capitalization only virtually elevates the market position of a stock even without any positive fundamental development. A company may also do a reverse split to avoid being delisted.
Hence, given the above factors, the decision of reverse stock split appears to cast a cautious outlook on ETFC in the near term. Although the company significantly trimmed its fourth quarter loss against prior year quarter, market volatility, asset quality issues and restructuring expenses continue to adversely affect the financials. In fact, ETFC is rumored to be a takeover target of its peers Charles Schwab Corp. (SCHW) and TD Ameritrade Holding Corp. (AMTD). However, ETFC is poised for enhancing its new customer accounts and asset quality while also mitigating its balance sheet and credit risk in the long run.
On Monday, the shares of ETFC closed at $1.51, down 3.8%, on the New York Stock Exchange.
Read the full analyst report on “ETFC”
Read the full analyst report on “C”
Read the full analyst report on “AMTD”
Read the full analyst report on “SCHW”
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