This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Citigroup Reverse Split Still Irks Shareholders

Stocks in this article: C

Stock splits, which increase share count and reduce price, and reverse stock splits that do the opposite, do nothing to alter the value to shareholders. They are tools often used by management to send psychological signals to the market.

In Citigroup's case, in allowing the stock to trade above $40, the management was hoping to shed penny stock traders and attract legitimate long-term investors. It was also intended as a signal that the crisis was behind the bank.

The move, however, did not go down well with some retail investors who saw it as little more than window dressing.

And given the stock's dismal performance in the two years since, those investors are still complaining.

On Tuesday the stock closed at $46.46 or what would have been $4.64 pre-reverse split, so that means shareholders have seen their stock move up by all of 12 cents in nearly two years.

"Reverse stock split has been and remains an emotional issue for shareholders," Corbat acknowledged at the meeting.

"This is not just an emotional issue," one shareholder told Corbat. "We are left with 10% of our holdings. We will never see those dividends for the remaining holdings. Not in my lifetime. Not in my children's and not in my grandchildren's."

But Corbat clarified that the dividend is set based on the bank's ability to pay dividends and is not based on its sharecount base. Once the board determines the amount that can be distributed as dividend and the Fed approves it, it is divided by the sharecount to arrive at the dividend per share. "Whether there is 1 share or 3 billion shares, your dividend is unaffected."

Essentially, shareholders are getting a lower dividend, not because of the lower sharecount, but because Citigroup has not been in a financially strong enough position to increase its dividend payout to what it once used to be.

O'Neill reiterated that shareholders had not lost their claim on the assets of the company as a result of the stock split. "In 2009, we made a very dilutive stock offering for which the company is very sorry. The split did not affect your economics, the issuance of shares did."

-- Written by Shanthi Bharatwaj in New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs