Citi shares dive on botched sale
Friday 18 December 2009
Shareholders and analysts have reacted angrily to Citigroup's botched $20.5bn (£12.5bn) fundraising, in which poor demand from investors drove the banking giant's share price sharply lower and left the US government unable to sell any of its stake.
Citigroup launched the fundraising in order to pay back $20bn of the $45bn it received from two taxpayer bailouts last year, but was able to find enough buyers only by offering new shares at the discounted price of $3.15. That was far below the level it had expected and had led the US Treasury to hope for.
Amid the recriminations yesterday, traders said Citigroup had misread the markets and mis-timed its efforts. Analysts said that foreign investors remained concerned about Citigroup's riskiest businesses and assets, and they scaled back earnings-per-share forecasts to account for the much higher number of shares that will now be in circulation.
The bank itself defended the outcome, pointing out it had completed the biggest equity fundraising in US history. Citigroup shares stayed low yesterday over concern on the US government's continued involvement in the company. The Treasury invested a second $25bn tranche of bailout funds in Citigroup shares at $3.25 and had planned to sell up to $5bn at the same time as the fundraising, but it refused to sell at a loss. It will still have a 26 per cent stake, giving it an ongoing say in how the company is run, and will gradually sell the stock between March and the end of next year.
Chris Kotowski, an analyst at Oppenheimer & Co, said Citigroup should have allowed the government to sell shares first, before raising new cash to buy out the other $20bn taxpayer loan.
"There would have been plenty of demand for government shares at over $4 per share because it would been a clear step toward a normal ownership structure. As long as that stake persists, there will be a cloud over the stock as shareholders will fear that the company will be run more on Washington logic than on business logic."
The $3.15 offer price was an 11.5 per cent discount to the previous day's close.
- 1 Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
- 2 Woman accidentally shoots herself in the head while posing for a selfie
- 3 Art Garfunkel: Paul Simon is a 'monster' with a Napoleon complex
- 4 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
Woman accidentally shoots herself in the head while posing for a selfie
Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
16-year-old girl beaten and burned alive by lynch mob in Rio Bravo, Guatemala
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...