NEW YORK (
) -- It has been nearly two years since
(C - Get Report)
decided to do a 10-for-1 reverse stock split, but it is still a sore point for Citigroup's long-time shareholders.
At the bank's annual meeting in New York on Wednesday, shareholders repeatedly urged management to consider a stock split, a move they hope would restore the money they believe they lost as a result of the reverse stock split.
One particularly irate shareholder clamoring for the 10-for-1 stock split claimed to have lost more than $1.5 million as a Citigroup shareholder of more than 30 years. "You guys know what the price of the stock is. It is the same price when we did the reverse split. This stock has to reach $600 for me to break even. Bring it down to $4.65 and then maybe it can climb back up to $60."
However, CEO Michael Corbat and Chairman Mike O'Neill said they backed the reverse-split move. While they remained focused on bringing the share price above tangible book value, the bank won't consider "splitting our way to prosperity," O'Neill said.
"This[reverse stock split] wasn't done to engineer the stock price," Corbat said in response to shareholders. "It was done to reduce volatility and to get shareholders out of the stock who were using it as a trading vehicle."
He added that a reduced sharecount also made it operationally easier for the bank to pay out its dividend.
In May 2011, Citigroup, which was still suffering from the fallout of the financial crisis, decided to dramatically reduce its share count by turning every 10 shares into a single share. The stock that had been trading at $4.52 at the time, began to trade above $40 a share.
Citigroup's then CEO Vikram Pandit and former Chairman Richard Parsons said the purpose of the reverse split was to increase the share of institutional investors holding the stock. Many mutual funds, they argued, are prevented from holding stocks that trade below $5, while others don't buy stocks that don't pay a dividend.