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It's shaping up to be a rough day for Citigroup (C). Shares dropped 8% in early trading thanks to some rather angry investors. Late Wednesday, the Treasury Department decided to back off a plan to sell some of its shares in Citi.Citi sold 5.4 billion new common shares at $3.15, which brought in roughly $17 billion. Citi also sold 35 million tangible equity units at $100 each, which brought in roughly $3.5 billion. The money is earmarked for repayment of $20 billion issued through TARP, which would lead to Citi not being considered a benefactor of "exceptional financial assistance" from TARP.
That said, perception is that Citi is one of the largest recipients of government support thanks to the recent economic meltdown. This news was followed by the aforementioned announcement that the Treasury will not sell any of its Citi stock in connection with the bank's offerings. This announcement is what stoked the ire of investors. Oppenheimer didn't help the situation, as it announced that Citi shareholders have been unnecessarily diluted, since the overhang of the government's stake still remains. Oppenheimer kept its perform rating on the shares.
Here is the problem for Citi: the stock can't afford to lose much more. The stock finished Wednesday below the $3.50 level, which could have acted as support ... unfortunately, this news and this morning's drop is not helping the stock. To say shares of the investment bank face an uphill battle may be the understatement of all understatements. Furthermore, watch for Citi to weigh on financials today, which could push the entire market lower.
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