E*Trade Shares Down on Share Sale News

Shares of E*Trade Financial fell in after-hours action after affiliates of Citadel Investments unveiled plans to sell a total of 170 million common shares.
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NEW YORK (

TheStreet

) --

E*Trade Financial

(ETFC) - Get Report

shares slumped late Wednesday after the online broker announced its largest shareholder was planning a secondary equity offering.

E*Trade said that two affiliates of Citadel Investments are selling a total of 170 million shares of the company's common stock, pursuant to the filing of a shelf registration statement with the

Securities and Exchange Commission

.

The sale also includes an over-allotment option for underwriters to purchase up to an additional 25.5 million shares of common stock, E*Trade said.

E*Trade will not receive any proceeds from the proposed offering.

Bank of America Merrill Lynch, Sandler O'Neill & Partners, and Citadel Securities are the joint book-running managers of the offering.

Last week, E*Trade posted a

first-quarter loss

of $48 million, or 2 cents a share.

E*Trade, which has often been rumored as a possible takeover target, has been working steadily to repair its balance sheet after the credit crisis took a toll on the company's asset-backed securities and home equity loan portfolios. It recently hired a new CEO, former Citigroup executive Steven Freiberg. In a conference call last week to discuss the first-quarter results, Freiberg told analysts that he was focused on continuing to fix the company, rather than looking for a buyer.

E*Trade shares have been stuck below the $2 level since April 28, 2009 when the company announced, along with a first-quarter loss, that it needed to implement a second

recapitalization plan

.

The stock was down 10 cents, or 5.4%, to $1.74, in afterhours trading. Volume came in at 41.6 million for the regular session, in line with the issue's average churn.

--

Written by Laurie Kulikowski in New York.