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Government's Plan to Sell Citigroup (C) Shares By Year End Could Fall Short

September 27, 2010 9:00 AM EDT Send to a Friend
The government's plans to sell all of its 7.7 billion common shares of Citigroup (NYSE: C) by year end may have been too ambitious, as slowing trading volume has impacted the Treasury's sale plan, the reported.

"The sales of Citigroup stock have slowed way down in July and August ," Linus Wilson, a professor of finance at the University of Louisiana, said. "The only option for the Treasury if it wants to exit Citigroup before the year-end seems to be to conduct a large secondary offering of the stake."

By the end of August, the government has sold less than half of its 7.7 billion shares, the report noted.

The government's current trading plan is set to expire on September 30, with or without it being completed, ahead of a quite period for third quarter earnings which is expected to begin on October 1.

Earlier in the month, reported that the government was nearing completing the sale of its latest 1.5 billion traunch. Even if the government completed the full sale of this traunch on time, it would still leave them with 3.6 billion shares remaining to sell before year end.

It would seem ambitious for the government to sell the remaining shares before year end using the current trading plan. However a stock offering, or share buyback by Citigroup itself could still make the year-end goal a reality.

Despite this minor set-back, there are two pieces of good news for Citigroup shareholders:
1. Citirgoup shares tend to outperform the market when the government takes a break in selling the shares.
2. The government share sales will soon be out of the way, which could be a green light for a number of institutions to "buy, buy' buy."

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mike9990 on 2010-09-28 09:34:12
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At 3.90 per share, what is the true value of citi when the govt seels their share?
Why not pick it up and wait?

It about the potential dilution, not the number of shares
Chris on 2010-09-27 10:50:59
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When the Government started selling it owned about 20% of the total outstanding number of shares. ie dumping 20% into the market which held 80%. That represented a 25% dilution. When the Gov't finishes the its recent round of selling it should be down to around 10% of the outstanding shares. ie 10% into 90% or a potential dilution of about 11%. Now, the shares are trading at $3.90 and the dilution ratio keeps dropping. The government's role will become meaningless way before they sell its last share. Even if it only sells another 50% of its shares by the end of the year the ratio will be 5% into 95% which is equal to a 5% potential dilution. The pros will back up the truck long before the gov't ends its selling spree because the gov't becomes less and less of a dilutive force with every share sold.

ali on 2010-09-27 09:15:45
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Why is Wilson sooooo fixated on C common? So, the gov. will not sell all of ots shares by 12/31/10.
Let's say it falls into February or March, is the world or the U.S. Treasury going to end? Doesn't Wilson have better things to do ? Why is this news?

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