Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Treasury to sell last of Citigroup shares

December 6, 2010 |  3:07 pm

The Obama administration said Monday it would sell the last of the Citigroup Inc. shares held by the Treasury, two years after bailing out the banking giant.

The Treasury said in a statement that it had launched the sale of 2.4 billion Citi shares to investors in a deal to be handled by Morgan Stanley.

The sale was contingent on the government receiving an “acceptable price,” Treasury said.

Citi Citi was saved from potential collapse by a $45-billion infusion of government capital amid the financial system meltdown two years ago.

The bank repaid $20 billion of the money in December 2009. The other $25 billion was converted into 7.7 billion Citi shares. Treasury has since sold 5.3 billion of those shares.

Citi’s stock, which fell as low as $1.02 in March 2009, has rebounded this year as the company returned to profitability. The shares traded as high as $4.97 in April. They were unchanged at $4.45 on Monday before the Treasury’s announcement, for a year-to-date gain of 34%. The shares fell to $4.39 in after-hours trading.

Even after jettisoning the last of the common stock the government would continue to hold warrants to buy additional shares, which could add to the Treasury’s ultimate return on the capital it gave Citi.

The government appears to be on track to earn a profit for taxpayers on its bailout of Citi. Through Oct. 19, with 3.6 billion shares yet to sell, Treasury said it had received $41.6 billion in revenue from the sale of Citi shares and from dividends and interest the bank paid. As of Monday, the remaining 2.4 billion shares were worth $10.7 billion at the market price.

The government’s exit as a major shareholder is key to the bank’s full return to health, including the potential resumption of cash dividend payments to private shareholders.

Citi said in a statement that it was “very appreciative of the support provided by the U.S. Treasury during the financial crisis.”

Citi has a total of 29 billion shares outstanding.

-- Tom Petruno

Photo credit: Mark Lennihan / Associated Press