Tuesday, October 9, 2012

Citi Trades Down on a Host of Woes

Citigroup (C) shares are off 9 cents this morning, or 2.4%, at $3.48, reversing a pre-market gain, amidst a host of woes — financial, image-wise, and other. The stock is notably weaker than most financials, which are trading up.

For one thing, the company’s $19.6 billion common stock offering may happen today: CNBC’s Bob Pisani reports the bank is likely to price its stock offering tonight at $3.30 to $3.35 per share, instantly diluting the stock.

Abu Dhabi’s sovereign wealth fund today filed an arbitration request accusing Citi of fraud in relation to a $5.7 billion investment by Abu Dhabi in Citi’s shares, demanding $4 billion from Citi. Citi said the allegations were without merit. The sovereign holds equity units that convert at a price of $31 or so in 2011, which means Abu Dhabi could face a substantial loss when it takes delivery of Citi common stock, the Financial Times explains.

The Washington Post, in a front-page article, says U.S. taxpayers could lose any profit from Citi’s repayment of TARP loans because the IRS has waved tax rules to allow Citi to keep billions in taxes. As Post writer Binyamin Appelbaum writes, “While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.”

Other bank stocks are holding up pretty well in contrast, with Morgan Stanley (MS) up 23 cents, or .8%, at $30.08, Goldman Sachs (GS) up $1, or .6%, at $163.69, JP Morgan (JPM) up 16 cents, or .4%, at $41.03, and Bank of America (BAC) up 17 cents, or 1%, at $15.36.

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