Updated from 12:20 a.m. EST
Citigroup's (C) investors may be relieved that the banking institution is not being fully nationalized, but that doesn't mean the company won't suffer from being under tighter government control.
The Wall Street Journal reported late Sunday that the company is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the bank to as much as 40%, citing people familiar with the situation.
In its proposed plan to regulators, Citi executives hope the stake will be closer to 25%, these people said, the Journal reports. But there is the possibility the talks could fall apart, the Journal adds.Shares of Citi jumped as high as 27% on Monday, before closing up 9.7% to $2.14. Investors seemed calmed by the fact that a larger government equity stake "could be a better outcome than a full nationalization as some have feared," Jason Goldberg, an analyst at Barclays Capital, wrote in a note. Still at it current stock price, Citi has just two choices -- nationalization or additional government intervention, says Morningstar analyst Jaime Peters. "
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