Government backs off Citi share offering

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Recall that as part of the plan for Citigroup (C) to cut its ties to the government, the Treasury Department was going to piggy-back the initial secondary offering. It hoped to sell perhaps $5 billion of its $25 billion in common stock, but the reaction to Citigroup’s plan was so weak, and the stock swoon so deep, that the government’s sales were postponed. But not indefinitely. It will look to exit its stake over the next year.

Citigroup was able to raise $17 billion from the common shares, but some thought it would be able to raise more, perhaps $20 billion. (If you include tangible equity units, it raised more than $20 billion). It seems that Citigroup shareholders are less willing to accept the massive dilution necessary to pay off the TARP funds than Bank of America (BAC) shareholders were. Over the next year, especially if the bank continues to languish, people will be asking whether the move to exit TARP was worth it. It seemed to be an emotional response to the news that Bank of America was getting off the public dole.

For more:
- here’s an article from MarketWatch

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