Wednesday, May 26, 2010

Citigroup Admits Stealing from Cemetaries, Cooks Books; MS Still Gets First Tranche of Treasury's Stock Sold (C)

Felix Salmon at Reuters:

Citigroup under pressure

May 26, 2010 17:14 EDT

Morgan Stanley did its job: it managed to sell 1.5 billion of the government’s shares in Citigroup for a total of $6.2 billion, or just over $4.13 a share. That’s a good price, compared both to today’s close of $3.86 a share and to Treasury’s cost basis of $3.25 per share. Still, there’s another 6.2 billion shares outstanding, which is quite a big overhang, especially now that Citi has admitted stealing from cemeteries, and looks like it’s doing some pretty egregious book-cooking at quarter-end:


Citi refused to comment on these numbers, but they’re big, and they look very bad. And a source involved in selling down Treasury’s stake in the bank seems to have come down with a severe case of bearishness, wondering if Treasury shouldn’t simply offload a massive stake to Qatar at a discount to the market price:

“If we dribble the shares into the market on a secondary basis, that may be the safest [strategy]. But it may not be the most economic. There are a lot of structural headwinds.”

Needless to say, buying bank stocks at the same time as big sovereign wealth funds has not proved to be a winning strategy in recent years....MORE