E*Trade Reverse Split Due June 2

E*Trade shares were falling after the online brokerage said its reverse stock split would take effect on June 2.
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NEW YORK (

TheStreet

) --

E*Trade Financial

(ETFC) - Get Report

shares slipped nearly 3% in premarket action as the online brokerage said its previously approved reverse stock split will take effect a week from Wednesday.

E*Trade shareholders approved a 1-for-10 reverse stock split at their annual meeting on May 13. The reverse stock split will combine 10 shares each of issued and outstanding common stock into one share of common stock, the online brokerage said.

Reverse stock splits

are typically implemented by troubled companies if the price of its common stock has fallen unreasonably low and the company is looking to bolster investor appeal of the stock.

Citigroup

(C) - Get Report

is one such company contemplating a reverse stock split. Citigroup shareholders approved at the annual meeting last month a measure to extend the board's authorization of implementing a reverse split through June 30, 2011.

E*Trade was hit hard by the financial meltdown and forced to recapitalize twice since late 2007, with the help of its largest investor

Citadel Investments

.

E*Trade's share price has hovered under $2 for at least the past year. E*Trade shares are down more than 90% from a five-year high of $27.57 reached in April 2006. Shares were down another 4 cents to $1.42 before the markets opened.

All outstanding and authorized securities that are exercisable or exchangeable for common stock will be adjusted proportionally based on the reverse split ratio of 1-for-10. E*Trade will not issue fractional shares in connection with the reverse stock split. Shareholders otherwise entitled will receive cash in lieu of fractional shares, the brokerage said.

The stock will continue to trade under the symbol "ETFC" on the Nasdaq Stock Market, but have a new CUSIP number of 269246401.

--Written by Laurie Kulikowski in New York.