U.S. take if it sells its Citi stake to settle cost of bailout: $8 billion

[TomCADem]

Source: Washington Post

Among the banks that rule Wall Street, Citigroup got a bailout that was bigger than the rest. Now the company is about to pay a king's ransom for its federal rescue.

The Obama administration is making final preparations to sell its stake in the New York bank, according to industry and federal sources. At today's prices, the sale would net more than $8 billion, by far the largest profit returned from any firm that accepted bailout funds, and the transaction would be the second-largest stock sale in history.

On paper, the government's 27 percent stake has grown in value to $33 billion. The size of the deal in the works has Wall Street buzzing. Only the stock offering by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987, was larger, according to Thomson Reuters.

***
The windfall expected from the stock sale would amount to a validation of the rescue plan adopted by government officials during the height of the financial panic, when the banking system neared the brink of collapse. A year ago, Citigroup's stock hovered around a dollar a share, and the bank's future seemed in doubt. On Friday, the stock closed at $4.31.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2010/03/26/AR2010032604938.html?hpid=topnews

[aquart]

1. Goodness, who thinks it's worth that much?

[msongs]

2. take the money and then regulate the heck out of them lol nt

[JerseygirlCT]

15. +1

[Statistical]

3. "Now the company is about to pay a king's ransom for its federal rescue." BS

Does the author not even have a passing understanding of how stock market works.

If the US govt sells it stake the shares will be transfer to new investors and new investors money to the US.

US govt shares ---> Investors
Investor's money ---> US govt.

Notice Citigroup doesn't appear in that equation anywhere.
Citigroup won't pay a single penny because the US govt sold it's stake.

[Lucky Luciano]

6. Citi paid via the dilution of their common equity. nt

[Statistical]

7. Well seeing as if they weren't bailout out the undilluted value of the company would have been 0...

still in theory I agree however that dilution occurred at the time of the bailout not now.

The sale of govt shares to private investors is a secondary transaction that doesn't affect citi in anyway.

$8 billion in shares if govt owns it or if private investors own it.

[Lucky Luciano]

8. $33B in new supply has no affect on Citi? (The $8B is the profit)

I am not sure if the government is going to sell it in pieces every day or if they will try to bring it in one MEGA-Slug through a syndicate, but selling all that stock will be inluential on the stock price! Though some investors may take it as a positive that the government feels they can safely exit the stock.

All that said, I still view all that dilution as VERY expensive for Citi whether the dilution occurred now or then - but they had to pay or, as you rightly point out, their stock would have been a bagel (zero).

[pundaint]

10. I agree with post #3 Let's say you own a chevy, GM made that chevy and sold it to a dealer

who sold it to you. Now lets say America owns a number of shares of Citi stock, Citi issued that stock and sold it to America a while ago, or conveyed it as part of a bailout deal. You own the chevy, America owns the stock. When you sell your chevy, GM is not affected, except to update it's warranty logs. When America sells it's Citi stock, Citi is not affected except to update it's shareholder logs.

[Lucky Luciano]

12. ok - let's put it this way - had Citi raised $25B in cash

through the sale of common stock and used that to buy back the preferred shares from the government (The preferred shares teh government converted to common), then there would have been $8B less in dilution to their market cap.

[movonne]

4. ?

[rockymountaindem]

5. But, you know, government involvement in these matters is the kiss of death

A big kiss of death worth $8 billion for taxpayers in addition to the damage averted if we had allowed Citi to collapse. Of course getting more regulation out of the bargain would be great, and is necessary, but at least we're not *totally* throwing our money out the window.

[pundaint]

9. What's that AIG "investment" worth, and do you have any idea how much the United States is on the

hook for what the Fed has committed? That last one was a trick question.

[MikeE]

11. U.S. take if it sells its Citi stake to settle cost of bailout: $8 billion

Source: Washington Post

... The Obama administration is making final preparations to sell its stake in the New York bank, according to industry and federal sources. At today's prices, the sale would net more than $8 billion, by far the largest profit returned from any firm that accepted bailout funds, and the transaction would be the second-largest stock sale in history.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2010/03/26/AR2010032604938.html?hpid=topnews

---

It looks like he just keeps racking up the wins. This is going to be another really positive piece of news for the Democrats to campaign on for the November elections, not to mention a great point in the next State of the Union.

[optimator]

13. the cheerleaders now support bailing out failed investment banks

this will only increase their risk taking since they know the taxpayers will cover it.

[pinniped]

14. The proceeds will just disappear anyways.

.

[TexasObserver]

16. K&R

[harry_pothead]

17. That'll pay for 8000 teachers for a full 20 years.

Get on that Obama.