Citigroup, Inc. (NYSE: C) has gone below $5 a share which triggers the dreaded sell-off by institutional investors who are not allowed to own stocks that trade below that level. And rumors of Vikram Pandit's departure from the CEO role are beginning to accumulate.
Unfortunately, the Credit Default Swap (CDS) market is now also kicking in. When this happens, it generally means that a company needs to come up with lots of cash to continue to insure its bonds. And since Tuesday, the CDS premium for Citi bonds rose 55% -- the annual cost of protecting $10 million of Citi debt against default for five years rose to $410,000 on Wednesday from $265,000 on Tuesday.
Meanwhile, CNBC's Charlie Gasparino claims that "the market is betting that Vikram Pandit's days are over." And with Citi just announcing that it will move up its quarterly reporting date from the 22nd to the 16th, the bad news should be out soon. I am sorry to say that it looks like the value of Citi's equity is about to hit bottom and never recover.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and is the author of You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns Citi shares.
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Reader Comments (Page 1 of 1)
1-14-2009 @ 8:55PM
alan said...
Sad to say that you are probably correct. The Citi boys and girls are poor chess players and have boxed themselves into a corner. It's just a few more moves before CHECK-MATE.
Sell all of the pieces of the enterprise you wish, did anyone tell uncle Pandy that the revenue stream goes with it.
Do you think there will be any real potential for a clawback on the $117mil he "stole" from the sale of Old Lane Partners?
1-14-2009 @ 10:38PM
arthur lee davis said...
MOST LIKELY ,BUT NOT HARDLY.
" stole", A RATHER HARSH WORD.
BUT IT MAY BE " TELL THE TRUTH, AND
SHAME THE DEVIL ".