Dilution - Dilution - Dilution! Government gets warrants in C!

Discussion in 'Stocks' started by bond tr4der, Nov 24, 2008.

  1. * $7 bn of preferred stock with an 8% dividend rate as the "fee for guarantee"

    * $20 bn preferred @ 8%, perpetual or redeemed in stock or cash

    * 10% warrant for the entire company with a strike price of $10.61 a share. Ten year term, "The warrants issued to UST are
    not subject to reduction based on additional offerings."

  2. The government owns Citigroup multiple times over. Letting the common stock still trade is a just a way to halt nationalization talk.
  3. Wrong. Govt. gets warrants for 10% of the $27B of preferred stock, ie. $2.7B worth of common stock warrants, not 10% of the entire company. Also, if a company receives $20B and issues $20B of preferred stock, that is not dilutive.
  4. C has a market cap of $20 billion. 10% of 20 billion is 2 billion so you're right. It's closer to 13% warrants for the company based on Friday's close.

    I strongly disagree that $20 billion in preferred stock is not dilutive.
  5. Well, its late and I really don't want to debate the issue, but if a company sells $20B worth of preferred stock and receives $20B in cash, that in effect, is a wash. $20B in new assets, and $20B of new liabilities. So, tell me, specifically how has the value of the common stock been diluted?
  6. I went to a PrimAmerica meeting and the guy said that Citi was the 4th branch of guvmit, how right he was.
  7. It's a wash on the 20 billion. Shares get diluted 20 billion HOWEVER your balance sheet gets a 20 billion lift.

    The kicker is the 7 billion preferred and the divvy cut.

    40% max loss on the stock not including some of this being priced in (ex. divvy cut).

    300 billion backstop is the question though. IMO that's worth way more than the preferred dilution.....unless I'm wrong.

    Still don't understand how those warrants work against the stock.


    C up in Japan.
  8. 8% cumulative dividends or redeemable in stock or cash. Preferred shares are no different than common shares when you're talking about issues such as EPS.

    If you're trying to argue that it's not dilutive I dunno what else to say.

  9. good point. It could be worth $250 billion depending on just how shitty these assets really are.
  10. It is definitely dilutive, just remains to be seen how much.

    Suddenly 1 share of common owns a much smaller slice of the Citigroup pie. Moreover, as the shareprice recovers, USG takes an even bigger slice via warrants. Finally, the wording in the document: "A factor
    taken into account for consideration of the UST’s consent is the ability to
    complete a common stock offering of appropriate size. " Sounds like C will needs & intends to float more shares ... even after the shares sold to Saudi and USG. Existing shareholders are getting diluted to oblivion.

    For your reference:

    #10     Nov 24, 2008