The US Treasury is planning to sell its Citigroup (NYSE: C) shares. The folio has 7.7 billion shares and the plan is to sell them over nine months. The current share price is $4.18 per share and this did not increase when the Treasury announcement was made. It is not clear how the Treasury intends to complete the sale, but it is probably going to be slowly. From a technical standpoint this is probably the best approach.
The current share price will still mean a profit for the government. It is estimated at around $8 billion. This is good news for the taxpayer, as many criticized the government for rescuing Citigroup during the recent financial crisis. It is believed by some analysts, that the large government sale is factored into the current share price.
In a statement, The Treasury Department said investment bank Morgan Stanley “will have discretionary authority to sell 1.5 billion shares of Citigroup common stock under certain parameters.”
Apparently Citigroup stock is one of the most active listings on the NYSE. It is also believed, by some analysts, that the huge supply of Citicorp shares on the market will not be advantageous for investors. Institutional investors are looking at investing in Citigroup. This will support the Treasury sale and prevent harm to current shareholders. Institutions buying large blocks of Citicorp shares will give the message that the restructure is approved.
Warnings about buying Citigroup shares centre on the need for the Group to complete its turnaround plan, in order to be a viable company. Citigroup has no bidders as yet for its non-core group assets in Citigroup Holdings. Some investors are counting on the areas that have been restructured to show profit.
Citigroup continues to find ways to reduce its debt. It is hoped the sale of Primerica Inc. will earn $234 million through the sale of 18 million shares at $12 to $14 a share.
An economic recovery is the good news Citigroup needs. An improving economy would strengthen the current share value. A recovering economy would also ensure that the Citigroup share price increases in value and will also attract retail investors.
Analysts are looking with interest at the next Citigroup earnings report and believe it will be a significant one.
Citigroup received $45 billion from the Federal Government’s Troubled Asset Relief Program (TARP) in 2008.
Treasury Plans to Sell Citigroup (NYSE: C) Shares October 2010 was created by and is property of American Consumer News.
