The proper definition of dilutive is any change to capital structure that reduces the per-share earnings assignable to the common. Since the preferreds have an earmark on the first $2.2B of earnings every year, this is without question dilutive. But this is all dancing around the bigger issue. Citi is insolvent - the important question here is whether $28B is enough to make them solvent. If it isn't - and I don't see any coherent argument making the case that it is - the dilution aspects aren't going to matter anyway.
Even more ridiculous than bailing out the U.S. automakers. Citi is a MULTINATIONAL company. There are branch offices right here in Brno, Czech Republic that employ Czechs, not Americans. Why should U.S. taxpayers bail out Citi? To save Czech jobs? -------------------------------------------------------------------------------- Citigroup? You mean the company that owns Smith Barney, who recommended that I buy shares in an Alliance Fund that was weighted heavily with Mexican Pesos just before the Peso crashed in 1994? Citi is a Mafia-controlled company. Why should U.S. taxpayers support the Mafia?
I gotta go with Wareco on this. By your definition issuing debt would be dilutive. The coupon on the preferred is no different from interest on debt, both reduce eps. This is leverage not dilution, the common get a residual claim on a larger asset base than before without putting in more money. I'm ignoring the warrants, I'm not goint to do the math to figure out which impact is more important. I don't think anyone knows if they are really insolvent - who can trust the marks on any financial's assets these days? The question is are they liquid in the near term and do people trust them enough to do business with them. This cash helps on that score.
I think you guys got the warrants dillution wrong. C agreed to issue 270m shares at $10. They got 5.4b shares outstading. Once the stock reaches $10 the market cap would be higher of course
Well obviously this is a sweet deal for Citi but at the same time I'm really not sure we wanted to test what would happen if the stock went to 50 cents today and 2 trillion in "stuff" would have to be put up at firesale prices.. At least the government was forced to do something like the original TARP. I mean there is a pretty obvious feedback loop with these toxic assets with something like Citi going down the drain, so credit tightens more, more people lose jobs, more people default which makes the toxic assets all the more toxic, repeat with another big bank. Hopefully that feedback loop works the on the positive side too with making the toxic assets less toxic.
I previously **had** accounts at Citibank in Brno, Czech Republic, but I closed them after I became pissed off at Citibankâs repeated incompetence. When I needed to perform a transaction beyond a simply deposit or withdrawal, Citi never got it right the first time. Wiring money to the U.S. Automatic payment of my telephone bill. Nothing. ----- I needed to get a VISA card so I could make some payments through the Internet. When I arrived at Citibankâs office, the branch manager led me to my âPersonal Bankerâ, a new face that I hadnât previously met. She did not even greet me or find out who I was. Instead, she immediately said to the branch manager, âIâm busy now. Iâm doing investments.â My personality only knows two modes: nice guy or devil from Hell. Obviously, my âPersonal Bankerâ and I were going to have a problem, so I excused myself and went for my wife. When we returned, our âPersonal Bankerâ informed us that Citibank has only corporate VISA cards, not personal ones. Therefore, my wife and I left to open an account at another bank. A short time later, we found out that Citibank **does** have personal VISA cards. This young lady is âdoing investmentsâ but she doesnât even know which VISA cards Citibank offers. ----- My wife works as a bridge designer. Her supervisor has a son who works for Citi in Prague. According to the son, Citiâs managers have explicitly told their subordinates, âIf you want to get ahead at Citi, you must give us negative information about your co-workersâ. ----- Thatâs what your hard-earned tax dollars are going to bail out.