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This morning, Citigroup (NYSE: C) began its $58-billion stock swap, a move that could leave the government with a 34% stake in the bank. The country's third-largest bank plans to swap common stock for (up to) $33 billion in preferred shares and convert as much as $25 billion of preferred shares held by the U.S. Treasury into common stock. The bank believes that the swap could (emphasis on could here) make Citigroup one of the world's best-capitalized banks. The action could add up to $61 billion of tangible common equity and $64 billion of Tier-1 common equity. Citigroup had planned to take this action back in April.
The stock swap could result in the issuance of more than 17 billion new common shares. Such a move could dilute the holdings of existing investors by 76%.
In terms of capital, Citigroup would be in a far better place thanks to the stock swap. Unfortunately, that isn't the case when it comes to the stock's technical performance. The stock continues to wallow in the $3 region, which some may see as a buying opportunity. Of course, others may view this as a sign of exactly how weak the stock has become. There are others still who will say the stock swap is a sign of how the government feels Citigroup is simply too big to fail.
Whatever your opinion of Citigroup watch for the stock to pop a bit this morning in response to the news.
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Reader Comments (Page 1 of 1)
6-10-2009 @ 2:33PM
PHILIPPE said...
I lost my full time job 2 months a go ,so i did apply for loan
modification with my mortgage ( SPECIALIZED LOAN SERVICING LLC )
my int/rate is 9.25 % they just told me today that I was denied
because I am not working .
I RECEVE UNEMPLYEMENT AND MY WIFE WORK FULL TIME.
and I WILL NEED TO PAID FOR THE EXTERIOR APPRAISAL THEY DID ( $
115.00 )
IT'S ...............................
6-11-2009 @ 9:31AM
al said...
The stock is set to "pop" today? Do you mean pop down into the ground !!!
The common shareholder is going to be diluted up the ying yang, the gov. will have a big say in the running of the company for some time to come, and these items will drive up the stock price?