Citi Stock Rises as U.S. Role Is Debated
(Updated with closing stock price)
NEW YORK (
) --
Citigroup's
(C) - Get Report
largest shareholder faces a dilemma, as the bank nears the completion of its preferred-for-common stock exchange: When and how much of its stake should it sell?
Citi shares closed up 1.7% to $4.85 Friday, despite the chairwoman of the Congressional Oversight Panel overseeing the Troubled Assets Relief Program railed against the U.S. government's lack of transparency and absence of an exit plan from its mammoth stake in the troubled company, the
New York Post
says. Elizabeth Warren, in an interview, noted that while other big companies receiving federal bailout money, including
Bank of America
(BAC) - Get Report
and
Wells Fargo
(WFC) - Get Report
, have offered comments regarding the eventual payback of TARP money, Citi, which received $45 billion in bailout funds, has been silent regarding a plan.
"Too big to fail and not strong enough to succeed is obviously no exit strategy at all," she told the
Post
.
Speculation about what the government might do with its
Citi stake has been mounting for weeks, particularly after the Swiss government exited its position in troubled
UBS
(UBS) - Get Report
last month.
TheStreet.com
readers and contributors debated what the government should do on Thursday, in a story about the company's completion of the exchange.
Regulators have not suggested a strategy to disentangle themselves from Citi nor any demands that the troubled bank put forth such a strategy, the
Post
says.
shareholders on Thursday approved a proposal to issue up to 60 billion new shares -- the final act in the company's six-month-long ordeal to complete an exchange that would convert preferred shares to common stock, making the U.S. government its largest shareholder, owning a 34% stake.
Citi shares hovered in a tight $3-trading range for much of this year, as some traders sought to
in pricing on the preferred shares and the common stock it would be exchanged for through arbitrage trades. Only recently did the stock start to rise closer to the $5 mark now that the exchange is being completed. Public shareholders had previously completed their share exchange.
While it's true that Citi's businesses are struggling more than large counterparts like
JPMorgan Chase
(JPM) - Get Report
and even BofA, the stock has had more downward pressure on it as traders shorted the common stock and went long the preferred. They have since been unwinding their short positions for the last month or so since the U.S. Treasury and other preferred holders received the interim securities.
Last week, hedge fund manager
was said to have acquired more than 2% of Citi shares, among other financial firms. The move is gutsy considering the U.S. government's large stake, apparent influence on Citi management and the lack of reported plans on how or when it will exit that stake.
-- Written by Laurie Kulikowski in New York.
