NEW YORK (
) -- Short interest in
fell slightly for the first time in at least four months following the announcement by the U.S. Treasury in late March of its plans to begin selling its 27% stake in the bank this year.
Short interest in the company's stock dipped to 524 million in the second half of March from 552 million during the previous two-week period. The New York Stock Exchange does not make historical short interest data available to the public. However, Citigroup short interest had risen eight straight times since I began tracking the data, which is published twice a month.
Short sellers borrow shares in the hope of seeing the price of a stock fall. If it does, they can buy the shares back for less and pocket the difference. The trade has not been a good one, however, as Citigroup's stock is up more than 40% year to date through Monday. The shares were flat in the premarket action following a gain of nine cents Monday to close at $4.64.
The overhang of the Treasury's 27% stake is the most plausible explanation for the steady pressure that short sellers have exerted on Citigroup. On December 17, the Treasury postponed paring down its holdings after it became apparent the offering price would be below the $3.25 the government originally paid for its Citigroup shares. That sparked a massive sell-off in the stock, which opened nearly 10% lower on the news.
Short sellers had also been betting heavily against
Bank of America
, when short interest fell sharply. That was about two months after Bank of America paid back the Treasury on its $45 billion investment under the Troubled Asset Relief Program.
Still, it is hard to draw too strong a correlation between short selling and Treasury ownership of a bank's stock.
which also counted the Treasury as a major shareholder under the TARP until December, has not been subject to the same kind of steady pressure from short sellers as Citigroup and Bank of America have been in recent months.
Written by Dan Freed in New York