Gov't Struggles to Unload Citigroup

Breaking up is hard to do. At least that's what the Treasury is discovering in their efforts to divest the taxpayer of their stake in Citigroup (NYSE:C). Thanks to a summer of anemic trading volume, it looks like they're going to miss their year-end deadline to unload the entire stake, and may have to change gears and register a secondary offering for the remaining shares.

The Treasury can't dump the remaining 17% of the company without crushing the stock, and they enter a blackout period on Friday where they're not allowed to sell any shares until Citigroup's quarterly numbers are released. It's a problem for both the Treasury and for Citigroup, who would like to put the government's involvement in their rear view.

"The sales of Citigroup stock have slowed way down in July and August ... The US Treasury will not finish its share sale by ... the end of the year," said Linus Wilson, a professor of finance at the University of Louisiana. "The only option for the Treasury if it wants to exit Citigroup before the year-end seems to be to conduct a large secondary offering of the stake."

How do you think a secondary offering of the government's stake in Citigroup would be received by the market? I'm thinking it would work out fairly well, and would be a great benefit to Citigroup going forward. That's assuming they've gotten their act together and aren't going to need more taxpayer life support in the future.

Overall, the government has made pretty good money on their stake in Citigroup, which is unfortunate because it sets a dangerous precedent. They'll be less hesitant to step in and bail out the next POS bank that's going tits up, because they'll be able to point to Citigroup and say, "Well, look how well that worked out."

Do we have any Citigroup buyers out there? Depending on when you got in and out, you could have done well with the stock this year despite its being range-bound between $3 and $4. Anyone know of any compelling reasons to build a position in Citigroup while it's this cheap?

Comments (6)

Sep 27, 2010 - 8:24am
happypantsmcgee, what's your opinion? Comment below:

The thing that scares me is 10 - 20 years down the road, some hot shot up and coming politician is gonna look at this and the auto deals and start espousing the benefits of the government investing people's tax dollars to shrink the deficit which will, at that point, be unfathomably large (if something doesn't change soon). Call me crazy but I bet 20 years ago most people would never have thought the things that are going on today would be happening in this country.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
  • 1
Sep 27, 2010 - 12:54pm
Midas Mulligan Magoo, what's your opinion? Comment below:
Edmundo Braverman:
Anyone know of any compelling reasons to build a position in Citigroup while it's this cheap?

Most favored nationalized bank status. The rep staked to Citi by the USG is far more massive than any bailout figure. They will sooner let Castro annex Florida than see Panditia fall.

Sep 27, 2010 - 1:05pm
Eddie Braverman, what's your opinion? Comment below:
Midas Mulligan Magoo:
Edmundo Braverman:
Anyone know of any compelling reasons to build a position in Citigroup while it's this cheap?

Most favored nationalized bank status. The rep staked to Citi by the USG is far more massive than any bailout figure. They will sooner let Castro annex Florida than see Panditia fall.

Yeah, I feel the same way. But that doesn't tell me the stock goes higher, it only tells me that it doesn't go lower.

Best Response
Sep 27, 2010 - 3:11pm
Midas Mulligan Magoo, what's your opinion? Comment below:
Edmundo Braverman:
Midas Mulligan Magoo:
Edmundo Braverman:
Anyone know of any compelling reasons to build a position in Citigroup while it's this cheap?

Most favored nationalized bank status. The rep staked to Citi by the USG is far more massive than any bailout figure. They will sooner let Castro annex Florida than see Panditia fall.

Yeah, I feel the same way. But that doesn't tell me the stock goes higher, it only tells me that it doesn't go lower.

Think we'll see a similar case as when the world realized they wouldn't tank completely. Brief spike and then a long ass hold within reasonably tight bounds. The point is that even with the constipation status they're in, I think it's just tough for the market orthodoxy to value such a huge company in the penny stock range for a long time. That having been said, memories are short these days and in could spike up fast on irrational exuberance, I am betting there will be a lot of media pandering as to why it's a grrrrreat buy (cue Tony the Tiger).

Sep 27, 2010 - 6:43pm
laudrup10, what's your opinion? Comment below:

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