Citi Stake Proves Profitable For Singapore
NEW YORK (
) -- At least one big investor in
Citigroup
(C) - Get Report
has realized more than $1 billion in profit since the recent preferred-to-common equity exchange, so why can't the U.S government?
The Government of Singapore Investment Corp. said Tuesday that, after amassing a more than 9% stake in Citi through the conversion of preferred securities to common stock on Sept. 11, it has since reduced its stake in the company to below 5% through open market sales.
The sovereign wealth fund's chief investment officer Ng Kok Song said its original $6.88 billion investment in the troubled institution, made in January 2008, currently shows a valuation profit of $3.2 billion, according to the
Wall Street Journal
. Half of that profit was realized after selling some of its stake, while the rest is based on Citi's closing price on Monday of $4.43 for the remaining shares it still owns, the
Journal
cited Kok Song as saying.
The Singapore government said a 5% level is more consistent with its plans to be a "portfolio investor." It plans to continue its investment in Citi "as we are confident of its long-term prospects," the statement said.
Citi has received $45 billion in bailout funds from the U.S. government. But so far it has yet to make provide any substantial details regarding the timing of its plans to divest all or part of the stake. Also, the chairwoman of the Congressional Oversight Panel recently railed against the government's lack of a plan to
the stake.
But with other big investors making a profit on their investments, perhaps the U.S. government should take a look.
Of course the difference between the U.S. government stake is not just one of size. Following the preferred-to-equity conversion on Sept. 10, the government became Citi's largest stakeholder, with a 34% stake and owning roughly 7.7 billion shares. But the government is not just a financial investor - it also wants to make sure that Citi is a viable company going forward and has been intimately involved in the changes taking place at the bank.
Citi still has $20 billion in government bailout funds that was not part of the preferred-to-common exchange it completed on Sept. 3. This capital is Tier-1 preferred capital, as opposed to common equity, according to CEO Vikram Pandit.
Perhaps the U.S. government could sell some stock to hedge fund investor
. Paulson has been snapping up bank stocks on the open market of late, including those of Citi.
Shares of Citi were up 5.2% to $4.66 in afternoon action. The stock has rallied sharply, along with the rest of the U.S. stock market, since dipping below $1 per share in early March, and it's risen nearly 80% since scraping a near-term closing low of $2.59 on July 10.
--Written by Laurie Kulikowski in New York.
