Downtrodden Citigroup Inc. (NYSE: C), which received its walking papers from Dow Jones on Monday, has informed five of its former executives that they'll no longer be receiving severance payouts. According to a report today in The Wall Street Journal [subscription required], recently departed executives Kevin Kessinger and Michael Klein will be among those affected by the decision.
Already, Citi has doled out approximately half of the $100 million it pledged to these former execs. The U.S. Treasury hasn't demanded that the severance payments be halted, but sources close to the bailed-out bank say that Citi's top brass "[want] to avoid even the possibility of a public backlash over the money."
Even though it would seem that Citi is finally getting a handle on the concept of money management -- or public relations, at the very least -- investors are hardly cheering. The stock has given up more than 3% today, extending its year-to-date drop of 45%. In fact, the shares are currently in position to finish the session below their 10-day and 20-day moving averages, which would mark the first breach of this double-barreled support since May 1.
What's even more troubling is C's inability to tackle the $4 level. This region has capped the stock's progress throughout 2009, and not even Citi's newly supportive 10-week moving average has been able to propel the shares through this technical hurdle.
During the short term, C's difficulties in this region could be exacerbated by an ungodly accumulation of overhead call open interest. The June 4 call hosts open interest of 902,581 contracts, while the June 5 call has 1,578,484 contracts in residence. These options still have several weeks of shelf life remaining, but it seems a safe bet that the shares will encounter options-related resistance as these contracts approach expiration.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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