market folly

We haven't covered the activity from Ken Griffin's hedge fund firm Citadel Investment Group for a bit because it's been a tornado of SEC 13D and Form 4 filings on their stake in ETrade Financial (ETFC) and we didn't want to bombard you with posts on it every other day. After the dust settled (for the moment at least), we thought we'd survey the damage in total to provide an overall look after the fact. This comes after our previous post that disclosed some of Citadel's sales. This time around was no different as the selling continued.

In late September, Citadel engaged in a debt-for-equity swap where they converted $87.9 million worth of Class A debentures. This yielded them 84.9 million shares with an exercise price of $1.03 per share. Citadel then also sold around 85 million shares ranging from prices of $1.70 to $2.08 and netted over $160 million from the transactions. After it was all said and done, Citadel was left holding 166.2 million shares of ETFC, or around $941 million worth at the time. They made the sales in order to manage their exposure levels in their portfolio. Citadel had previously planned to sell a bunch of shares under a pre-arranged trading schedule but then abandoned that plan. Their equity stake in ETrade was down to a 9.9% ownership stake, having previously been as high as 14.9%. We fully expect more SEC filings to come down the line if the past is any indication. To see the rest of Citadel's holdings, head to our post on their portfolio.

Ken Griffin started his career trading options from his dorm room at Harvard his freshman year. He then launched a convertible bond arbitrage fund his sophomore year and by his senior year, he had $1 million from investors. Since then, Citadel has seen average annual returns of around 20%. The year of 2008 was a difficult one for them though, as their flagship Wellington and Kensington funds were down big. In fact, they were among the top 10 hedge fund asset losers. They have bounced back this year though as their funds are up by quite a healthy margin. For some of Citadel's positions in UK markets, head to our post here.

Taken from Google Finance, ETrade is "a financial services company, that provides online brokerage and related products and services primarily to individual retail investors, under the brand E*TRADE Financial. The Company’s products and services include investor-focused banking primarily sweep deposits and savings products and asset gathering. The Company’s subsidiaries include, E*TRADE Bank, which provides investor-focused banking services to retail customers nationwide and deposit accounts insured by the Federal Deposit Insurance Corporation (FDIC); E*TRADE Capital Markets, LLC (ETCM), which is a registered broker-dealer and market-maker; E*TRADE Clearing LLC, which is the clearing firm for the Company’s brokerage subsidiaries and is a wholly-owned operating subsidiary of E*TRADE Bank, and E*TRADE Securities LLC, which is a registered broker-dealer and the primary provider of brokerage services to the customers."