Citigroup (C) Shares Are Set to Underperform As U.S. Treasury Puts the "Stock For Sale" Sign Up Again
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Today the U.S. Treasury announced it will restart sales of its Citigroup (NYSE: C) common stock, following the recent blackout period due to quarterly earnings. If history is any guide, shares of Citigroup could again underperform until the government share sales are complete.
From April 26 through July 1, when Treasury sold 2.6 billion shares of Citigroup, the stock sold off 18 percent. This was worse than the 12.3 percent drop in the S&P 500 during that time frame and also worse than the 14.7 percent drop in the Financial Select Sector SPDR (NYSE: XLF) during that time frame.
When they were selling, Treasury sold on average about 53 million shares per day, or 7% of the average daily volume.
During the time that the Treasury didn't sell stock, July 1 - July 22, the stock was up 9 percent. This versus a 6 percent rise in the S&P 500 during that time-frame and 4.6 percent rise in the Financial Select Sector SPDR (NYSE: XLF).
The data above simply shows that when the government is in the market selling million of shares daily, that extra supply of stock is too much for the market to absorb and the stock will underperform. When they are not in the market selling, then the shares will outperform.
Long-term investors are trying to wait out the government share sales on the view that when the selling is complete then "look-out above". While this may be what plays out it could still be a long time coming.
The government still has 5.1 billion shares of Citigroup. At the current pace of selling, the government won't be done selling until at least November. That is of course is if there aren't any glitches in the sell program.
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From April 26 through July 1, when Treasury sold 2.6 billion shares of Citigroup, the stock sold off 18 percent. This was worse than the 12.3 percent drop in the S&P 500 during that time frame and also worse than the 14.7 percent drop in the Financial Select Sector SPDR (NYSE: XLF) during that time frame.
When they were selling, Treasury sold on average about 53 million shares per day, or 7% of the average daily volume.
During the time that the Treasury didn't sell stock, July 1 - July 22, the stock was up 9 percent. This versus a 6 percent rise in the S&P 500 during that time-frame and 4.6 percent rise in the Financial Select Sector SPDR (NYSE: XLF).
The data above simply shows that when the government is in the market selling million of shares daily, that extra supply of stock is too much for the market to absorb and the stock will underperform. When they are not in the market selling, then the shares will outperform.
Long-term investors are trying to wait out the government share sales on the view that when the selling is complete then "look-out above". While this may be what plays out it could still be a long time coming.
The government still has 5.1 billion shares of Citigroup. At the current pace of selling, the government won't be done selling until at least November. That is of course is if there aren't any glitches in the sell program.
Market Moving News and Intelligence - Free Sign-Up
http://www.streetinsider.com/premium_content.php
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