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why are citi preferreds up? i can't figure it out
- Thread starter robbie380
- Start date
http://www.elitetrader.com/vb/showthread.php?s=&threadid=150541&perpage=6&pagenumber=9
although the calculation may be simplistic, you could value preferred stock at
(common stock price / 3.25) * par value of preferred stock
although the calculation may be simplistic, you could value preferred stock at
(common stock price / 3.25) * par value of preferred stock
Quote from robbie380:
i understand the $3.25/share conversion price but why would a c-i be trading up? what am i missing?
Quote from m22au:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=150541&perpage=6&pagenumber=9
although the calculation may be simplistic, you could value preferred stock at
(common stock price / 3.25) * par value of preferred stock
that would far overvalue the preferreds if you use that calc.
I just received an email back from citi. This is their response.
For Publicly Issued Straight and Convertible Preferred Stock and Trust Preferred Securities, the exchange price will be $3.25/share at a premium to market. Because these shares are trading at a significant discount to their par value, the exchange will also take place at a discount to that value. However, this discount will still be in excess of the current market value of the securities. The exact discount will be determined on a series-by-series basis, and holders of the series AA, E, F and T, as well as TruPs and eTruPs should feel free to contact Citi's capital markets desk for further details. Additionally, these details will be made publicly available in an S-4 filing with the Securities and Exchange Commission as soon as practicable.
The privately placed convertible preferred stock are receiving $3.25/share at par in exchange for an interim security and warrants that will convert only if shareholders approve an increase in authorized shares. This pricing is based on a variety of factors, including the large private holders made a commitment to convert ahead of the vote and illiquidity issues, among others.
Details of this transaction, including a transaction summary, are available on our website at http://www.citigroup.com/citi/fin/.
Kind regards,
Citi Investor Relations
For Publicly Issued Straight and Convertible Preferred Stock and Trust Preferred Securities, the exchange price will be $3.25/share at a premium to market. Because these shares are trading at a significant discount to their par value, the exchange will also take place at a discount to that value. However, this discount will still be in excess of the current market value of the securities. The exact discount will be determined on a series-by-series basis, and holders of the series AA, E, F and T, as well as TruPs and eTruPs should feel free to contact Citi's capital markets desk for further details. Additionally, these details will be made publicly available in an S-4 filing with the Securities and Exchange Commission as soon as practicable.
The privately placed convertible preferred stock are receiving $3.25/share at par in exchange for an interim security and warrants that will convert only if shareholders approve an increase in authorized shares. This pricing is based on a variety of factors, including the large private holders made a commitment to convert ahead of the vote and illiquidity issues, among others.
Details of this transaction, including a transaction summary, are available on our website at http://www.citigroup.com/citi/fin/.
Kind regards,
Citi Investor Relations
Thanks Daal.
Also there is a good link on that page to Zerohedge's blog:
For a full rundown: http://zerohedge.blogspot.com/2009/02/reason-for-todays-persistent-decline-in.html
*********************
Zerohedge wrote:
Carney, you missed what most other funds missed as well, that the private/government investors and public investors will be treated as two totally separate classes, which was noted in footnote 2 to the conversion example that citi posted here: http://www.citigroup.com/citi/fin/data/p090227a.pdf?ieNocache=645
as the footnote says "Ownership assumes conversion of publicly issued preferred stock is done at a significant premium to market, while the U.S. Governmentâs and
privately placed preferred are done at par."
The arb play assuming no premium for private preferred holders generates 50% returns, but public investors can be roaylly screwed if they do the common/pref arb as the premium for public investors could easily end up being high enough to destroy any return whatsoever.
This could easily become the next volkswagen play
For a full rundown: http://zerohedge.blogspot.com/2009/02/reason-for-todays-persistent-decline-in.html
Also there is a good link on that page to Zerohedge's blog:
For a full rundown: http://zerohedge.blogspot.com/2009/02/reason-for-todays-persistent-decline-in.html
*********************
Zerohedge wrote:
Carney, you missed what most other funds missed as well, that the private/government investors and public investors will be treated as two totally separate classes, which was noted in footnote 2 to the conversion example that citi posted here: http://www.citigroup.com/citi/fin/data/p090227a.pdf?ieNocache=645
as the footnote says "Ownership assumes conversion of publicly issued preferred stock is done at a significant premium to market, while the U.S. Governmentâs and
privately placed preferred are done at par."
The arb play assuming no premium for private preferred holders generates 50% returns, but public investors can be roaylly screwed if they do the common/pref arb as the premium for public investors could easily end up being high enough to destroy any return whatsoever.
This could easily become the next volkswagen play
For a full rundown: http://zerohedge.blogspot.com/2009/02/reason-for-todays-persistent-decline-in.html
Quote from Daal:
We were wrong
http://www.businessinsider.com/heres-why-citis-preferred-soared-today-2009-2