That doesn't address my point at all. In order to raise this 7.5 billion, Citi could have: A-Taken this 11% loan and left the dividend alone. B-Not taken this loan and lowered the dividend by that amount. They chose A. You can ignore the dividend and say the loan is to "bolster reserves and increase solvency", or you can say they're paying the 11% loan out as a dividend. It's really just meaningless number shuffling. Like I said earlier, I don't really have an opinion as to whether this is a good deal for them or not...
It's a horrible deal for shareholders. Citi borrowed $7.5 billion for a cost of $1.65 billion. Then the stock converts and Shareholders' are diluded by $7.5 billion or 5%. The $5.85 billion goes toward reserves and is slowly paid out as dividends.
The news said that the market really loved this deal and the DOW went up +215 because of it. But, why didn't C go up????
C hasn't told us why the SIVs wont be a balance sheet line item.... 134 bill of level 3 is still out there....... unless the Paulson sets up a Level 3 dumpster for the banks ... I'll wait on this one.........
Stay away from this stock on the long side. IT is going to fall further. And then your entry at $30 will wallow away. Much better trades out there. Get over the impulse to catch the fallings knife. It will get stuck in your chest.
I think if your'e trading it intraday, or taking a very short term position you will definately risk losing big whichever way short or long. Since this cash injection though, in the long term, this is going to be a fantastic opportunity! This is a traders blog, and I'm much more of a long term investor, so this is all I will say. (I do actively trade options though. At the moment I've got a load of USO puts and FXA and NEM calls)
The only play in C was to sell 50+ vol....If nothing else the AD investment should dampen volatility,and judging by todays closing option prices,the first chunk was taken out
This is classic, shit if you had an expensive suit you could be a typical wall street analyst. Thanks for keping it real.