Consensus on C Tomorrow

Discussion in 'Stocks' started by luxor, Nov 23, 2008.

  1. I'm sure it is - that is how government has been injecting capital. Instead of using TARP money to buy MBS - they are allowing companies to issue preferred stock and buying it from them.
     
    #21     Nov 24, 2008
  2. Daal

    Daal

    and shareholders get bailout
     
    #22     Nov 24, 2008
  3. Are you guys not reading the original text?

    Double-dilution whammy.

    The "backstop" wording is...curious. Will protect against "unusually large" losses.

    Here's the term sheet...

    http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081123a1.pdf
     
    #23     Nov 24, 2008
  4. Hmmm...

    So government gets $20 billion in preferreds for injection @ 8% and more preferreds for the right to access government funds.

    So a good guess would be the government owns 79.9% of Citi? Similar to Fannie, Freddie, AIG, and whatever else we nationalized recently.
     
    #24     Nov 24, 2008
  5. Daal

    Daal

    their earnings will be lower because of the preferred dividend. but its not a bad deal, they didnt even had warrants. its not really dilluting the common stock, its just $1.6B a year insurance program. The stock price was almost surely expecting something worse. I think C opens a good deal higher
     
    #25     Nov 24, 2008
  6. Daal

    Daal

    Nevermind, just noticed they had 10% warrants and destroyed the dividend
     
    #26     Nov 24, 2008
  7. $2.2B insurance policy - there are two sets of preferred totaling $28B - same 8% divie on each.

    Dividend on common is gone.

    What a stock does short-term on events like this is anybody's guess - but I can see precious little fundamental reason to hold the common at all. Bonds, other preferred etc, quite possibly, but I would have no interest in the common.
     
    #27     Nov 24, 2008
  8. yes......that's your problem. You're not.
     
    #28     Nov 24, 2008
  9. Divvy was already priced in. regardless of what the market thinks, divvy's are zero-sum anyways.
     
    #29     Nov 24, 2008
  10. Daal

    Daal

    yes the stock should still go up. 10% dilution seems generous
     
    #30     Nov 24, 2008