month from now. All I know is that it closed today at fairly miraculous
price of $5.05. I am not sure what this price represents. It is
somewhat comforting that neither Yahoo nor Bloomberg can figure out
what this price means either. Note on the following two slides their
respective calculations on the market capitalization of C at the
closing level. There is a $30b difference in the calculation. I think
they are both wrong.
The
calculation by Yahoo assumes that there are 5.5b shares outstanding.
That is not correct. I believe that this number comes from C’s 2nd Q
10-Q. In that report C shows 5.9b shares outstanding. This number would
be reduced by treasury stock buy backs and therefore comes close to
that 5.5b number. On July 23rd and 29th C swapped a boatload of
preferred into newly issued common. The Yahoo calculation does not take
this transaction into effect when deriving the MC for C.
Bloomberg
is very precise on the number of shares used in its calculation. They
are using 11,341,826,000 (11.3b). It is not clear where this number
comes from. It represents an increase of 5.4b shares from the net 5.9b
that were recorded at the end of March. The following chart describes
who did what to whom in the C deal.
From
this one would have assumed that the 3.846b, 823mm, 3.351, and 1.660b
(the non Government Pref.) are now part of the public float. That total
of new shares comes to 9.7b. This number does not square well with the
number that Bloomberg uses. It would appear that some of the Private
stock is not included in the public float calculation. For the sake of
discussion assume that the Bloomberg share number is correct. If
anything it understates the public float.
That number does not
reflect the shares that are held by the USG (aka the taxpayer). The USG
holds an additional 7.7b shares. These shares are not now part of the
public float and therefore their exclusion in determining public market
cap is correct. But at a $5.05 price the taxpayer has a gain in the
common that it owns, and I doubt many of the citizens want to be
long-term holders. When considering what the pro-form market cap is,
the USG shares should be included. At a minimum there should be an
asterisk on this number.
If you take Bloomberg’s 11.3b and add
to it the 7.7b USG shares you get 19b total shares. At $5.05 that comes
to $96b. By way of comparison the de-TARPed GS has a market cap of only
$84b. I’m not sure if anyone knows the fair value of C.
Note:
At
a price above $5 the opportunity for Treasury to do a secondary to
offload some of its stock must be very tempting (there is a $14b mark
to market gain). This is the taxpayer’s money. It makes perfect sense
to take some ‘off the table’ given the market conditions. News of that
transaction would read very well for Mr. Geithner and the
Administration. They have an obligation to protect all of our
interests. In this case getting some of the eggs safely back into the
nest would seem wise.
I don’t know the provisions for a lock
up of the USG shares. It might require a vote. Those shares are in
effect owned by 300 million people. I think they would all vote to do a
secondary offering. It would be an interesting Proxy fight.
Don't forget to factor in what the earnings would be
if mark to market still existed as all the crap is
still there and probably growing. lol
Why do we even pretend anymore that we have a "market" for stocks? Why not just decree whatever the hell price you want and be done with it? The US "economy" right now is the most pathetic excuse of an economy - ever.
Two economies - the real one and the Government-controlled one.
this will end badly
I think Citi is trying to move away from absolutes like market cap and earnings. They are going with some of the new accounting that uses Suggested valuations. Having the flexability to change the float, or earnings... depending on circumstances allows for greater innovation in these trying times.
I now send them photographs of my mortgage payments instead of the cash. It is so much neater for everyone involved.
The USG preferred shares get officially converted on 9-9-09.
The proxy vote for that end on 9-2-09.
Read the details here:
http://www.citigroup.com/citi/fin/data/prosp090717.pdf?ieNocache=160
Note: Deep ZH type of read.
The number is about 22.9B according to footnoted citi slide.
http://www.citigroup.com/citi/fin/data/snapshot0908.pdf?ieNocache=875
It is Geithner's job to lose as much of the Treasuries money as possible for this makes the banks anything else that it has given money to stronger. Let's be adults about this instead of always going down this truth, justice and the American way route. You can have those or you can have a country where you can get rich speculating while having the pleasure of touching yourself inappropriately while you blow up brown people.
Take your pick.
Feed back from a number of folks confirms that the "right" total of shares is 22.9mm shares. This number does not include the remaining USG pref (the old TARP Pref).At some point this will become common as well.
At the current price C is worth $120b.
Well then, I would say the "rescue" has been a success.
That would be the "wrong" total if your data provider displayed it. C has 11.3B shares out, market cap $58B. Bloomberg, Google Finance, and Reuters all agree.
Preferred shares convertible to an add'l 11.5B common (3.846B x 3 from your table) have not yet been converted. These are still held as interim securities, which have similar characteristics to convertible preferred, plus warrants to buy shares at $0.01 if shareholders refuse to authorize the conversion.
Read the 8-K's of 7/23 and 7/30.
I believe after all C preferreds are converted and issued there will be approx. 23 billion common shares outstanding ($121B market cap) and approx. $40B in preferred's left outstanding including $18B the government will continue to hold. The private issue was also converted at $$3.25/share could probably be hedged at this point (since you can now borrow the common without a problem)
Quick math on so-called "normalized earnings" (who knows when?): Assuming $1.4T in Total assets (Citi is downsizing but has some off b/s coming on balance sheet) and 1% ROA (the best of days!) C can earn approx $14B less Pfd Div of approx. $2.5B leaves $11.5B in earnings on 23B shares outstanding or 0.50/share. Obviously, alot of "best case" assumptions to get to "normalized earnings". And assumption retain key employees, customers and don't sell highest performing subidiaries. Also assumes no further dilution by issuing new shares which might be needed as C still has a Deferred Tax Asset of $40B and $35B in Goodwill/Intangibles which might need to be reserved against or written down.
OK, an interesting article. I'll file it along side the one where a bunch academics are trying decide how many angels can dance on a pinhead.
The point is - just assume it's value is zero. OK, it's totally worthless - so what?
Just trade it and make yourself richer, forget about what anybody else thinks.
you touch on a very complex matter....the american is conditioned to think of his government as pristine purity....he is also taught to worship power and majesty
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
There is quite a large crowd of Americans who think otherwise.
How about some toxic mortgage infested brokerge firms?
Anyone up for some student loans???
LOL...
Upon full conversion there will be 23.3 billion shares outstanding of Citi. Mkt cap is therefore $125 billion with the stock trading at $5.37.
Curious, who audits these/this load? What is their responsibility?
Second, EV? I bring this up merely as a point of reference in relation to getting to share price.
Third, if in fact the benchmonkeys are 'required' to add as it rises, the upward pyramid has some clear implications to when the echo market quake occurs. Oh and this applies to the other winners out there, AIG, et.al.
Thanks for the topic.
Are you really a robot?
You look a lot like a gurl.
sbux shut down their wireless internet -- unemployeds no longer able to gun mkt?
Thanks RT! I always love the charts. I'm just a bumpkin from Hamburg but I never invest without exit plans on the downside AND ( bold and caps are for CB) upside. Gradually taking profits when I am so fortunate as to find them is second nature to me. As an involuntary US shareholder I would like to place some sell orders...
I believe this massive increase in share count is actually causing upward pressure on the stock. It is now the 17th largest company in America and moves up 15% a week. For all benchmark monkeys if they don't own it they fall futher behind each week.
Ar far as we are on the alphabet soup, let's start with what AIG is worth?!? Good piece Bruce but liquidity is driving all junk financials up, including MBI.
cheers,
Leo
I think the same dynamic is going on with AIG. Yahoo Finance says it has 135 million shares outstanding. At $48/share that's a market cap of $6.48 billion. But does the 135 million include the U.S. government's 78% equity stake? If not, if the 135 million are the non-government equity shares equalling only 22% of the company's value, the total market cap would be $29.4 billion.
I know this market is insane but surely it can't be assigning a market cap in the neighborhood of $30 billion to the worthless equity of AIG.
All i know is that, for 6 and half hours yesterday, you could have bought ALL the citigroup you wanted at between 4.66 and 5.10
THIS MORNING however - as of 7:30, over 1.5mln shares have traded up 5% to five and a quarter. yes, such fucking urgency to buy the EXACT SAME STOCK five percent up from yesterday. such an incredible urgency that they are doing these trades premkt. not that there wasnt any for sale yesterday - over 1.2billion shares traded.
OMG WTF I HAVE TO OWN CITI LOL OMG WTF BUY BUY BUY!!!!
i would treat the 7.7b as share dilution...i cannot believe that a sale of 7.7b shares could bring current price....
Nice catch on Yahoo, but Bloomberg's number is correct. The 3 pieces of $12.5B (private and 2 govt) were converted into interim securities, not common (yet). These will eventually be converted to common after a shareholder vote.
Only the 3 public pieces were converted to common on 7/29: 823 + 3,351 + 1,660 = 5.8B. Added to the 5.5B shares out as of 6/30, you get Bloomberg's 11.3B shares out.
CITI ACQUIRED !!!
And you will not believe by whom.
Too funny. I'll take a mortgage with my Slurpee....
Wow, 20b shares times $5, a market cap of $100b! Soon Citi might use the stock to buy some oil wells or gold mines, or make a hostile bid a la AOL for "Time Warner". Any European or Japanese banks flushed with cash for an M&A? I bet Gold Men or JPM would be able to advise Citi on a deal before they find out what the Citi shares are worth.
citi worth essentially nothing
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Yes, I agree, they should go hostile on some foreign banks. Or maybe do a secondary, with a relatively small dilution they could pay back a lot of govt money.
Even better was the article today on AIG, FNM, and FRE - basically a bunch of analysts were saying there was no way any of their equity was worth anything, but yet the casino betters still bid them up.
It never ends. Bear Stearns - $30 on Friday, $2 on Monday. WM - stock rocketed in after hours on 9/25/08, after new came out that they were getting bought by JPM. Stock tanked when the real news came out that they were getting taking over by the FDIC, who was selling the assets to JPM.
So what fuckers still believe in efficient markets here?
Anyone remember the value of Volkwagen the last spring? Was it back in 1998 when Iomega was larger than GM? I still have my Zip drive, I just don't use it anymore.
Thank you Bruce.
Iomega. Nice one, a true blast from the past.
I see they were bought by EMC last year. For $150M, according to Bloomberg.
C is worth less than $1. You heard it here first.
Without the tit of the government, it is worth 0.
Which will soon be itself worth exactly that - ZERO.
Agreed. So much mystery surrounding Citi .. I think the move is to buy a bunch of 2011 call LEAPS at 7.50 or 10 and stuff them into a drawer. Implied vol is mid 60s and if no one knows what its worth today, these may be grossly underpriced.
I won't buy stocks like C just on principle.
Grossly underpriced? For a shit worthless company that only survives because the taxpayers got looted hard.
If the market service providers can't agree on the issued capital of a company, what hope has the general public of working out the investment mathematics? Perhaps it is up to Citi to keep the market properly informed.
This morning I told a colleague to get rid of his C holding b/c it's a complete mystery as to what that company is even worth. By the end of they day he was just laughing at my face. I guess the price appreciation is the only assurance people need these days -- quite sad.
I'm sure many people were laughing in the face of sound advice during the tech boom; only you should have looked at their faces when the music stopped and they couldn't find a chair.
Bruce....on so many levels, this is a fantastic article; thank you very much! Most if not all folks have no idea what value they are trading on when the number of shares available is in question, lol!
Add to that the cacophony of crap on the balance sheet and how it is valued under FASB FAS 157 and it is surely a crap shoot: certainly goes toward supporting the notion of the NYSE being the world's largest casino.
and the off balance sheet garbage that has to come back in Jan 2010 per FASB will make valuations even more interesting.
thank you for this excellent piece of work.