E-Trade Shares Rise 19% After Announcing 2-for-1 Stock Split

E-Trade Group Inc. shares rose nearly 19% on Monday after announcing it was splitting its stock 2 for 1, after a year of seeing its share price more than double on growth in online trading.

E-Trade, the No. 2 online broker, rose $8.66 to close at a record $55.44 on Nasdaq. The stock closed 1998 at $46.78, up from $23 at the end of 1997.

It’s the first split for the Palo Alto-based company, which priced its initial public offering at $10.50 in August 1996. E-Trade said the split will be for shareholders of record Jan. 15, effective after the close of trading Jan. 29.

The split caters to E-Trade’s own online trading customers, who like to trade stocks with relatively low share prices, said Steve Franco, electronic commerce analyst at Piper Jaffray Cos. “They want to keep the stock at a level where people can buy it in decent quantities,” he said. “E-Trade keeps track of the top 10 stocks traded by its customers, and its stock is always in the top 10, so they’re very conscious of that.”

Shares of Charles Schwab Corp., the biggest online broker, fell $1.19 to close at $55 on the New York Stock Exchange, and Ameritrade Holding Corp., the No. 6 online broker, rose $1.56 to close at $33.06 on Nasdaq. Ameritrade split its stock 2 for 1 on Aug. 17, and Schwab split its stock 3 for 2 on Dec. 11.

“It’s par for the course on the Internet, people buying the stock on a split,” said Bill Burnham, analyst with Credit Suisse First Boston. “I continue to be at a loss for how things work sometimes--that’s a substantial move on a split.”

E-Trade executives wanted to split the stock in October 1997, when it last reached the mid-$40s, but the price dipped too quickly, said company spokeswoman Lisa Nash.

“The 20s to the 30s is the general trading range, over time, that we look for,” Nash said. “It’s really been our overall guiding strategy.”

E-Trade and online brokerage industry customer trading volume grew by more than 30% in the fourth quarter, driven by the buying of Internet stocks, industry executives and analysts said. In September, the company began spending $100 million in a marketing campaign aimed at taking market share from Schwab.

Last week, E-Trade said 500,000 people registered for its free Web site in the preceding three months.