Shares of Citigroup today went up more than 7% to $3.82.
Why Are Citigroup Shares Surging?
Today’s increase may have been driven by strong demand for the bank’s preferred shares. Citigroup is offering $2 billion of 30 year-preferred securities, as part of its agreement with regulators to repay its bank bail out funds.
With an 8.875% yield, the shares are attracting strong demand from institutional investors, according to Dow Jones Newswires. The strong showing for the preferred shares may be encouraging buying of the common shares.
Here are three good things for Citigroup:
1) A return to profitability? Citigroup could return to profitability in 2010.
2) The wind down of Citi Holdings – where many of the bank’s toxic or complicated assets are held - appears to be progressing on schedule.
3) Credit losses may continue to increase through much of the year. But analysts expect that Citigroup’s $54 billion capital reserves are excessive, which means they could flow back to shareholders in the form of dividends.
Is It A Strong Buy?
Much of what happens next for Citigroup stock will depend on what happens after March 16, 2010, when the lockup ends and the Treasury can begin selling its 27% stake in C to the investing community. Once the government is gone completely from the company, some investors who have remained on the sideline might be tempted to get in. Of course much will depend on whether the company continues to execute its turnaround. Right now, the major investors putting up the big bucks seem content that C is well on its way to divesting itself of over $572 billion in what it deemed ‘bad assets’ and is likely to earn significant amounts of earnings from its traditional, core operations.
On Twitter:
- March $4 calls traded cheap as a penny are at 8 cents today.
- crazy action in $C today, March $4 calls have potential to 10 fold.
- Proceeds of Prefeered being used to payoff Abu Dabai Sheiks
- would it be a good idea to switch from common shares to preferred...yield almost 9%
- moving more afterhours
- Pricing Preferred Offering at $25 Par with Yield of 8.875%...Size is Roughly $2 Billion,
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