Two days after Citigroup moved to untangled itself from Washington, the Treasury reversed course Wednesday and backed away from plans to immediately sell a portion of its stake in the banking giant, according to a person briefed on the situation.
The decision came after Citigroup badly misread the financial markets on Wednesday and struggled to sell new shares to pay back its bailout funds, The New York Timesâs Eric Dash reports.
The new stock is expected to be priced at $3.15 a share â below the $3.25 price at which the government assumed its one-third stake in Citigroup. The Treasury is now expected to retain its stake and try to sell the stock over the next 6 to 12 months.
The trouble with the share sale underscored the lingering worries over Citigroupâs financial health and raised concern that the bankâs eagerness to free itself from government oversight on issues such as employee pay might come at a high cost to shareholders. It also may heighten pressure on Citigroupâs chief executive, Vikram S. Pandit.
Citigroup attempted to sell stock only a day after another giant bank, Wells Fargo, held a similar sale to raise money to pay back its bailout money.
The development followed news earlier Wednesday that the Abu Dhabi Investment Authority had filed a multibillion-dollar arbitration claim claiming âfraudulent misrepresentationâ on the part of Citigroup after the government-run fundâs $7.5 billion investment in Citigroup went south.
A Citigroup spokesman, said the claims are âentirely without meritâ and the bank planned to vigorously defend itself against them. John Fitzgibbons, the editor of IPOScoop.com, likened the Citigroup stock offering to a one-day sale at Macyâs department store.
âThey have to discount their merchandise to get the shoppers in,â Mr. Fitzgibbons said. âIf they didnât have a sale, nobody stream in.â
http://dealbook.blogs.nytimes.com/2009/12/16/us-said-to-reconsider-quick-sale-of-citigroup-stake/
The decision came after Citigroup badly misread the financial markets on Wednesday and struggled to sell new shares to pay back its bailout funds, The New York Timesâs Eric Dash reports.
The new stock is expected to be priced at $3.15 a share â below the $3.25 price at which the government assumed its one-third stake in Citigroup. The Treasury is now expected to retain its stake and try to sell the stock over the next 6 to 12 months.
The trouble with the share sale underscored the lingering worries over Citigroupâs financial health and raised concern that the bankâs eagerness to free itself from government oversight on issues such as employee pay might come at a high cost to shareholders. It also may heighten pressure on Citigroupâs chief executive, Vikram S. Pandit.
Citigroup attempted to sell stock only a day after another giant bank, Wells Fargo, held a similar sale to raise money to pay back its bailout money.
The development followed news earlier Wednesday that the Abu Dhabi Investment Authority had filed a multibillion-dollar arbitration claim claiming âfraudulent misrepresentationâ on the part of Citigroup after the government-run fundâs $7.5 billion investment in Citigroup went south.
A Citigroup spokesman, said the claims are âentirely without meritâ and the bank planned to vigorously defend itself against them. John Fitzgibbons, the editor of IPOScoop.com, likened the Citigroup stock offering to a one-day sale at Macyâs department store.
âThey have to discount their merchandise to get the shoppers in,â Mr. Fitzgibbons said. âIf they didnât have a sale, nobody stream in.â
http://dealbook.blogs.nytimes.com/2009/12/16/us-said-to-reconsider-quick-sale-of-citigroup-stake/
