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TMFAleph1 (95.22)

Citi Wants Out. What About Shareholders?

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December 10, 2009 – Comments (6) | RELATED TICKERS: BAC , C , JPM

Bank of America's (NYSE: BAC) plan to repay $45 billion in TARP bailout funds, which was completed this week, left Citigroup (NYSE: C) in a lurch. Citi now urgently wants... [more]

6 Comments – Post Your Own

#1) On December 10, 2009 at 6:53 PM, Vet67to82 (< 20) wrote:

I agree with, and disagree with some of the points ...  this is MY take ...

Basically, I can't see Citigroup  selling stock BELOW Tangible Book Value per Share  (TBVPS)  ... it's NOT in the stockholder's interests, and the USA gov't is a stockholder. 

 Tangible Book Value Per Share - TBVPS -  value looks at what common shareholders can, or should, expect to receive if the firm goes bankrupt and all of its assets are liquidated (at their book values.)   Intangible assets, goodwill, etc.  are removed from this calculation because they cannot be sold during liquidation. Companies with high tangible book value per share provide shareholders with more insurance in case of bankruptcy.

Let's look at Citigroup Inc C:NYSE

Cash per share (MRQ) $1.16

$3.86 +$0.0001 0.00% Vol. 272,707,947

Tangible Book Value per share (MRQ) 4.38
Price / tbv = $3.86 / $4.38 = 0.8813

Is 0.8813 < 1, 

YES, then C is UNDERVALUED - yep ... big time!

Tangible book value is just ONE metric of fundamental analysis, along with chart analysis, Market direction, Sector direction, Industry direction, good news, or bad news relating to either C or one of its competitors ... ALL, and more, go into a stock's price.


The USA gov't has a chunk of C's stock, ( approx 34% )as well as "insulating" about 200 BILLION of C's riskier liabilities .... and C has BILLIONS in CASH.

If anything ... C should buy back the USA stock ... at market value ... it's selling at a discount, but still at a premium to what the USA paid  ... and retire those shares .. which'll improve the TBVPS. 

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#2) On December 10, 2009 at 10:30 PM, rd80 (98.22) wrote:

Anyone know if the preferred conversion earlier this year included an anti-dilution clause?

I've done a little looking, but haven't found anything.

Alex - The gov't holds $27 billion of C preferred.  In addition to the $20 B at Treasury, the Fed and FDIC combined have another $7 B from the asset guarantee deal last year.

 

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#3) On December 11, 2009 at 10:26 AM, chk999 (99.97) wrote:

There's just no polite way to describe what Citi management is doing to shareholders. This one is in the "drop it likes its hot" pile.

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#4) On December 13, 2009 at 12:27 PM, Vet67to82 (< 20) wrote:

Basically, I can't see Citigroup selling stock BELOW Tangible Book Value per Share (TBVPS) ... it's NOT in the stockholder's interests, and the USA gov't is a stockholder.

 I'd say it's too late to pay back TARP simply to avoid the PAY CZAR's decisions. Yes, Citi may lose some of it's top employees ... but, if the underlings, were paying attention in the meetings, and to the instructions they were given ... then they may have a few good ideas of their own .... give them a promotion and a "pay raise" and see if they can do a good, or even great, job ... for less money ... to the benefit of the stockholders ... instead of the egos of those that got us in this spot in the first place.

If anything ... C should buy back the USA stock ... at market value ... it's selling at a discount, but still at a premium to what the USA paid ... and retire those shares .. which'll improve earnings and the TBVPS.

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#5) On December 15, 2009 at 5:14 PM, Vet67to82 (< 20) wrote:

My understanding is that we'll know more about C's Secondary Offering tomorrow.   Based on my grasp of  C's Tangible Book Value per Share (TBVPS), I expect I'll be buying into C's offering.  

C's selling below its TBSPS to the tune of:

TBVSP = $4.38 - 3.57 = $ 0.81.  $0.81 / $4.38 = 18.5 %   

 The wide international exposure of C, positions C to do well in a global recovery.  Since my projections are on a "C" two to three years into the future ... I believe the potential for a double, and a triple ... with some trading opportunities along the way, makes C a speculative play that can't be passed up.     

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#6) On December 15, 2009 at 11:36 PM, TMFAleph1 (95.22) wrote:

@Vet67to82,

I don't necessarily disagree with your analysis, but it is critical to recognize -- as you do -- that Citigroup is a speculation, rather than an investment.

Alex Dumortier

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