why are citi preferreds up? i can't figure it out

Yes you're right - and ultimately most market participants are in the dark as to what the conversion price will be. That's enough of a reason for me to avoid trading the C preferreds.

However for anyone wanting to be cheeky, they could start doing their sums on BAC common and BAC preferred, and see if there is a trade to make there. As I have posted before, US govt stake = $45 billion and market cap of common stock is approx $19.8 billion.

Quote from Daal:

The release says 'significant premium' whatever that is I believe will be more than 20%. The problem of course is that every smart arb will spend the entire weekend thinking about this and pounce on monday till there is no edge ajdusted for the risk you take
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What does not make sense is that the Term Sheet says "$3.25 at premium to market"

WTF does that MEAN? Why say $3.25 if it's going to be a higher number? If it's 3.25 you get XX shares, period. Then, what does "at premium to market" mean?

has anyone done the math to see how they arrives at the preferred ownership %'s?


This is perplexing.
 
Quote from m22au:


http://seekingalpha.com/article/123...preferred-may-be-problematic-too?source=yahoo
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The seeking alpha math looks right
"The Pref's closed at $8.05 on Friday. They are said to convert to significant premium to market. If one takes Thursday's closing price of $2.50 for Citi common, 3.6 share is equal to $9/share, which is a 9/5.5 = 64% premium to market to the Thursday preferred closing price of $5.50"

Since the UST and C are used past figures to determine 'premium' and everything tanked since then, it seems a little crazy to try to play this one. Instructive situation though
 
Another thought - at the risk of being too simplistic, C stock hit a low of approx $1.20 in premarket, and an intraday high of $1.93 before 9.45am.

The stock could trade in that range for several days, weeks and possibly months - it's the same percentage range as a stock trading between $20 and $32.16.
 
Food for though;

The $3.25 per common shares was established based on the 20 day average ending the day before 2/9.

The "market value" of the preferred is set the same way.

For C-M this value is a few pennies from $10.

@ 10% premium the conversion ratio is $11/3.25 = 3.38

@ 20% premium the conversion ratio is $12/3.25 = 3.69

@ 30% premium the conversion ratio is $13/3.25 = 4.00

@ 40% premium the conversion ratio is $14/3.25 = 4.30

@ 50% premium the conversion ratio is $15/3.25 = 4.62

The current ratio implied by the market is 8.14/1.5 = 5.43 or a 76.5% premium to market. I'd bet on the 50% number.
 
as in a (zerohedge described) short-covering rally? (bullish for common)

or a future common stock injection by the US govt? (bearish for common)


Quote from winstontj:

wait till they start buying common... see what happens then
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