E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) is a smart enough company that it should have known better about one issue.  It was smart on another.  The troubled online broker has finally announced it has appointed Steven Freiberg as its new CEO effective April 1, 2010.  This is thought to be a good choice.  But then the company simultaneously said that it would propose for shareholder vote a 1 for 10 reverse share split.

Freiberg is an experienced financial services executive who has been with Citigroup Inc. (NYSE: C) for roughly thirty years. He will also take a seat on the company’s board of directors.  He is 53 years old and recently served as Co-Chairman and Co-CEO of Citigroup’s Global Consumer Group  Interim-CEO Robert Druskin will continue his role as Chairman of E*TRADE.

Freiberg’s latest role in Citi included supervising all consumer business lines in 53 countries, including investment products, retail and commercial banking, credit cards, mortgages, and consumer finance. Previously at Citigroup, Freiberg has served as Chairman and CEO of Citi Cards, Chairman and CEO of Citigroup’s Investment Products Division N.A., and has had responsibility for retail investment products, platforms, sales, and service.  Mr. Freiberg has served as a board member of MasterCard International since 2006, he serves on the board of directors of the March of Dimes, and is Co-Chair of the NYC Council of Habitat for Humanity.

But here is where the question arises… E*TRADE is not in NASDAQ listing violations for its share price.  Yes, it is true that no one wants to be CEO of a $1.00 stock…. But the company should know better than to have simultaneously announced a 1-for-10 reverse stock split.  That split and consequent shrinking outstanding shares will be up for vote at the company’s 2010 annual meeting scheduled for May 13, 2010.

The announcement of Freiberg is a win.  The reverse split is not, and the bad news is winning in a down market today.  Right about 5 minutes after the open, E*TRADE is down almost 7% at $1.46 and we have already seen more than 14 million shares trade hands.

There is one good thing about the reverse split… you can start to use stock options again.

JON C. OGG

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