Citi Offers a Bullish Wells Fargo Trade
NEW YORK (
) --
Citigroup
(C) - Get Citigroup Inc. Report
has issued $60.7 million worth of structured notes to
Wells Fargo
(WFC) - Get Wells Fargo & Company Report
common stock.
The equity-linked securities (ELKS), whose ticker is "WFC UN" will pay a yield of 4.646% over a period of six months. At that point, investors can either cash out on their initial investment or exchange the securities for a fixed number of Wells Fargo shares.
The trade is one for Wells Fargo bulls who want to juice returns on the stock.
On the upside, the notes offer a guaranteed yield much higher than Wells' current 0.75% dividend payout. The higher the stock goes, the greater a dividend investors receive and the more the underlying investment could be worth. On the downside, if Wells shares go into a freefall, the structures could end up being worthless.
The securities were priced at $10 apiece but come with a "downside threshold closing price" of $21.44. If Wells' stock drops below that level at any time between now and May 25, investors will still receive a yield but their underlying investment will be nil.
"In this worst case scenario, the ELKS will have outperformed the underlying equity on a per annum basis by the difference between the coupon and any dividends paid on the underlying equity," Citi says in an offering statement filed with the
TheStreet Recommends
Securities and Exchange Commission
.
Wells shares have stayed above the downside threshold since May 2009 and traded in a range of $23.02 to $34.25 over the past 52 weeks. On Tuesday morning, the stock was down 0.5% at $27.07.
-- Written by Lauren Tara LaCapra in New York
.
>To contact the writer of this article, click here:
Lauren Tara LaCapra
.
>To follow the writer on Twitter, go to
http://twitter.com/laurenlacapra
.
>To submit a news tip, send an email to:
.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
