The government held back on selling some of its Citigroup shares during July and August, and that puts in danger the government’s deadline to unload all its stock in Citi by year-end.
The Treasury, which has a 17 percent stake in Citi, slowed its sales because of a decline in stock market trading volume during those months, the Financial Times reports.
The government can’t sell large quantities of stock at once on the open market because that would depress the stock’s price. And that in turn would lessen the value of the government’s remaining stake in addition to angering other shareholders.
Analysts and bankers tell the paper that Citi may adjust its strategy to a single share offering rather than continuing to sell dribs and drabs of the stock in the open market.
“The sales of Citigroup stock have slowed way down in July and August. The Treasury will not finish its share sale by the end of the year,” Linus Wilson, a professor of finance at the University of Louisiana, told the FT.
“The only option for the Treasury if it wants to exit Citigroup before year-end seems to be to conduct a large secondary offering of the stake.”
Holding Citi shares longer may actually pay off for the government. Star bank analyst Dick Bove, says it’s “by far” his favorite bank stock.
“CEO Vikram Pandit, in my view, has done a phenomenally good job in turning this company around,” Bove told Forbes.
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