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E*Trade takeover hopes fade after Citadel bails

March 14, 2013: 3:35 PM ET

Click to track E*Trade shares.

E*Trade shares sank Thursday after the online brokerage said one of its biggest investors would sell its stake.

Chicago based hedge fund Citadel plans to sell more than 27 million E*Trade shares in a sale set to occur next week.

That sent shares of E*Trade (ETFC) down 7.5% to $10.93 in afternoon trading.

The news that Citadel was selling its 9% stake in E*Trade signaled to investors that the brokerage will not be put up for sale anytime soon.

Citadel founder Kenneth Griffin had been pushing the company in that direction. Griffin set up a committee in 2011 to explore "strategic alternatives," including a sale.

Related: BlackBerry back from dead (for now) with Z10

E*Trade is the third-largest publicly traded online brokerage firm, behind Charles Schwab (SCHW) and TD Ameritrade (AMTD). But the company's mortgage business has struggled in the years since the housing crisis.

Despite Thursday's sell-off, shares of E*Trade are up nearly 23% so far this year. But the stock still remains well below its highs from 2007, when it traded above $250 a share.

Meanwhile, the significance of Griffin's move was clear to some traders on StockTwits.

$ETFC Chat is that Citadel sale makes Etrade takeover less likely.

That could explain the strange odor some traders have detected.

$ETFC god I knew this thing smelled...if it takes out $12, the bull beats the smell i guess

Others see anĀ ulterior motive for Citadel.

Citadel dumping $ETFC stake cause they aren't getting the order flow from them. That was main reason for their position in first place.

Whatever the case may be, it's safe to say the E*Trade spokes-baby is not happy.

The annoying talking baby is probably crying about this. E*Trade's biggest investor, hedge fund Citadel, is selling stake. $ETFC down 6.5%.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

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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