Take-Private of Citi
Outside of the high market cap, what are some reasons why a take private of Citi would not work? My thinking is that bending of the expense curve, ROTCE increase, and exiting of legacy businesses will all take 6 to 12 quarters to fully play out. In the meantime, the company is continuously hit with downward pressure due to the lack of near term catalysts. Seems like it's better suited as a private company, then a public one.
Incredibly complex regulatory environment is the main one - legacy businesses of course, inability to add meaningful leverage to increase returns, and longtime lack of investment in technology/risk infrastructure that makes the bank inefficient at all levels. Also, I don't think the FTC would allow a take-private of one of the largest SIFIs.
If you were to take private a financials company, it should be a smaller one without so much regulatory complexity. Citi is a lengthy and bottoms-up rebuild, no one has that much capacity to work through that
What a great idea! A $85B+ take private of an incredibly complex targeted in one of the most uncertain macro / operating environments without clear growth drivers outside “cost cuts.” What could go wrong?
also your only possible exit is either JPM buys it (impossible) or you re-IPO it - maybe you could get a SWF to get in at the end (good luck getting that through every regulatory body in the world), but you'd need a $150+BN exit if you're paying any type of entry premium to make it work. would be impossible to get out of
JPM only gets the green light to eat regional banks. No way they are allowed to look in the direction of Citi lol. It’s IPO or bust
And the company’s already public so if that’s the end goal… why take it private? You’re gonna have to pay 20% purchase premium anyways and just get eaten by fees on both directions. All for Shiti Bank, which is highly cyclical, has no m&a opportunities due to antitrust, super over regulated- impossible to leverage and forced to keep massive cash stores and treasuries on their balance sheet. OP, this might be the dumbest idea I’ve heard on this form.
and yet it just might work. Investing is all about contrarian thinking, right?
Yeah, the only way I see Citi changing significantly would be a an activist investor taking a huge stake and agitating improvements while it’s public.
I think if they continue to fail to bend the cost curve might be a good activist play but too big, complex, and regulation-bound for take private
Low quality talent and downward spiral
Qui et aut ex voluptates. Cum voluptate adipisci quae dolores et tenetur. Ipsa aliquam voluptas corrupti molestias ut. Perspiciatis occaecati perspiciatis qui nam sed et provident aperiam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...