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Treasury Sells 1.5 Billion Citi Shares

Citigroup's largest stakeholder, the U.S. Treasury, announced that it completed the sale of 1.5 billion shares of the bank and plans to sell an additional 1.5 billion by the end of the quarter.



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largest shareholder, the U.S. Treasury, has completed its first round of share sales, netting $6.2 billion.

The U.S. Treasury said as the market closed Wednesday that it completed the sale of 1.5 billion shares, or 19.5% of Citigroup's common stock, as part of a trading plan announced on April 26, with

Morgan Stanley

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as the sales agent.

As part of the exchange offers completed by Citigroup last summer to strengthen its capital base, the U.S. Treasury received 7.7 billion shares of common stock at $3.25 a share for the $25 billion in preferred stock it held. The $25 billion in preferred stock was a part of the $45 billion in total bailout funds injected into Citigroup in late 2008. Citigroup had repaid the other $20 billion in late December after a large common equity raise.

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Following the stock sale, the government still owns 6.2 billion shares of Citigroup common stock. It expects to continue selling its shares in the market in an orderly fashion, the Treasury says.

As part of that plan, the government has entered into a second pre-arranged written trading plan under which Morgan Stanley will have discretionary authority to sell an additional 1.5 billion shares under certain parameters, it said. The plan will terminate on June 30 so that the Treasury would be in accordance with the roughly two-week blackout period set by Citigroup in advance of its second-quarter earnings release in mid-July.

Citigroup shares jumped as much as 6.6% to $4.03 on Wednesday following an upgrade to buy from Oppenheimer. Goldman Sachs on Monday also had upgraded Citigroup to a buy rating.

After a run-up this year, where the stock even hit the critical $5 mark, Citigroup shares are now down 20% since April 23, the last day of trading before the Treasury announced it would beginning selling its stake in the bank.

Citigroup remains one of the most actively traded stocks on the

New York Stock Exchange

-- something that is likely to change if the bank were to undergo a

reverse stock split

. More than 1.23 billion shares of Citigroup changed hands on Wednesday.

Citigroup shares closed up 2.1% to $3.86 Wednesday after rising as much as 6.6% following an upgrade to buy from Oppenheimer -- the second upgrade this week

--Written by Laurie Kulikowski in New York.