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Fallout: The Financial Crisis

Citigroup’s shares take a big hit

Alisa Roth Dec 17, 2009
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Fallout: The Financial Crisis

Citigroup’s shares take a big hit

Alisa Roth Dec 17, 2009
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TEXT OF STORY

Kai Ryssdal: This was a rough day for Citigroup shareholders, among whom we can all count ourselves. The company’s stock touched $3.15 at one point today — the lowest it has been in four months. You think back to Tuesday and everything was sunshine and light for Citi. It was getting out of TARP. The government was going to sell its shares as well. We asked Marketplace’s Alisa Roth to find out what the heck happened.


ALISA ROTH: Citigroup is anxious to repay the money it owes the government. Because it doesn’t want any restrictions on how much it can pay its executives.

So after the market closed yesterday, the bank put more than five billion shares up for sale to raise that cash. But the only way it could get investors interested was to offer them at bargain prices.

Gerard Cassidy is a bank analyst at RBC Capital Markets. He says there were just too many shares of Citigroup out there already.

GERARD CASSIDY: Investors are discovering that even going forward when we get out of the mess we’re in, the opportunities for Citi may not be as great because the share count is so gigantic.

He says during the downturn, Citigroup needed to raise money. And it did that by selling more and more shares. That means that now, every piece of Citi is worth a lot less.

He thinks Citigroup will eventually have to reduce the number of shares on the market.

CASSIDY: Because it’s embarrassing to have your stocks stay at $3 a share or $4 a share for such a large company.

It’s not just the stock for sale right now that’s dragging the price down. The government owns billions of shares, too. And investors are afraid it’ll flood the market when it sells.

Sean Ryan follows banks at Wisco Research, it’s an independent research firm.

SEAN RYAN: Everyone knows that the government is going to become a big seller, and so that tends to dampen the appetite for a stock.

The government tried to reassure investors today. It said it won’t sell any of its shares for at least three months. After that, it’ll leak them into the market over the next year.

In New York, I’m Alisa Roth for Marketplace.

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