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E*Trade shares rally as CEO departs

August 9, 2012: 1:22 PM ET

E*Trade is looking for a new chief executive.

The online brokerage firm said Thursday that CEO Steven Freiberg has left the company as it works on strengthening its financial position. Last month, E*Trade reported a 24% drop in second-quarter earnings to $35.9 million, or 14 cents per share.

The company did not say why Freiberg left the company but E*Trade has been struggling for years with losses on mortgage-related assets and the continued exodus of small investors from the stock market.

E*Trade is the third-largest publicly traded online brokerage firm, behind Charles Schwab (SCHW, Fortune 500) and TD Ameritrade (AMTD).

Related: Investors yank $5.7 billion from U.S. stocks - most in 10 weeks

In a brief statement, E*Trade said chairman Frank Petrilli will serve as interim CEO until a permanent replacement is found.

Petrilli said E*Trade is implementing a "refined business strategy" that will fous on its core brokerage business, reducing risk and cutting costs.

"Accordingly, 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," he said.

Shares of E*Trade (ETFC) rose 6% on the news.

Last year, one of E*Trade's largest investors, Chicago-based hedge fund Citadel, pressured the brokerage to put itself up for sale. In a letter to the Securities and Exchange Commission, Citadel slammed E*Trade for "poor management decisions" that caused "catastrophic losses for shareholders."

E*Trade is among Citadel's largest holdings, which include Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500)

Citadel founder Kenneth Griffin is on the committee that will appoint E*Trade's new CEO.

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Ben Rooney
Ben Rooney
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Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney

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