Surprise! Surprise! Surprise! Citigroup is back raising capital. I went to call this post Ponzi Financing at Citigroup, but alas that title was already taken. I am running out of titles for Citigroup. Seriously, I am going to write this post, then figure out the title. So when you see the title, realize it was formulated at the end.
CNN Money is reporting Citigroup To Sell $3 Billion In Stock To Boost Capital.
Citigroup Inc. (C) is going back to the markets for more funds, less than two weeks after reporting nearly $14 billion in write- downs and a week after selling $6 billion in preferred stock.
Unlike the sale of preferred stock, Citigroup’s sale of common stock will further dilute its shareholders. Ratings agencies, however, give more credit to common equity and don’t like to see too much preferred in banks’ capital structures.
“We are issuing common equity at this time as we continue to optimize our capital structure,” Gary Crittenden, Citigroup’s chief financial officer, said in a release.
Mish Translation: We have filled up our preferred bucket and this is where it gets nasty for us and anyone silly enough to buy our stock at these prices.
Citigroup has already raised more than $36 billion in fresh capital by selling stakes to long-term investors like sovereign wealth funds and by issuing preferred stock. The bank has done so to plug the hole opened by more than $35 billion in write-downs to reflect losses on complicated securities backed by mortgages, high-risk loans like those made to fund LBOs and other damage related to the credit crisis.
Citigroup could sell more than the $3 billion in common stock if markets have the appetite.
“We’re pleased with the strong interest we have already received regarding this issuance,” Crittenden said in a release.
My Comment: Of course Crittenden is pleased. He is raising capital at cheap prices. As long as there is a pool of greater fools, he ought to try and raise $20 billion. Sad to say, I doubt $20 billion will be anywhere close to enough.
“Given market fundamentals, it’s a very opportunistic time to issue,” Matt Eagan, vice president and portfolio manager at Loomis, Sayles & Co. in Boston, said Tuesday.
My Comment: Fundamentals? The fundamentals are horrid. What’s not horrid is sentiment and most think the bottom is in. I don’t. Nonetheless, Eagan has this correct: “It’s a very opportunistic time to issue”. Indeed it is, because the bottom is in crowd just can’t get enough of this garbage right now. Perhaps that is what Eagan meant.
- Shell Games at First Horizon, HBOS, Citigroup, Merrill
- Citigroup, RBS, Barclays, others, Short of Capital
- Need For Capital At Merrill Lynch, Citigroup, RBS
- Digging Into Citigroup’s Numbers
- Ponzi Financing At Citigroup
- Less Than Meets The Eye at Citigroup, Goldman
- Dear Citigroup Customer ….
- Is Citigroup’s Dividend Safe?
- Citigroup Freezes HELOCs
- Citigroup VIEs Raise Question Of Solvency
- Abu Dhabi Deal Raises Questions About Citigroup’s Health
- Cost of Capital “Ratchets Up” at Citigroup and Merrill
- Analyst Meredith Whitney Asks Banks “Where’s Waldo?”
- Citigroup’s Strange New Definition Of “High Risk”
- Citigroup’s Cannibalization Policy
- More Writedowns Force Citigroup To Sell Assets
- Question of Solvency at Citigroup
- Chuck Prince Resigns : Replaced by a Parrot
- Enron Accounting at Citigroup
- Super SIVs – A Fraudulent Attempt at Concealment
And kicking it off back on July 10,2007 was Quotes of the Day / Top Call
Chuck Prince – Citigroup Ceo
No End Soon to Buyout Boom: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”.
If ever there was market arrogance, the statements by Chuck Prince says it all. …
It’s tough calling a top but I am going to try. I suggest the current trend is exhausted.
Citigroup Weekly Chart
click on chart for sharper image
To be fair my “top call” was for the S&P; not Citigroup. The S&P; made a marginal new high by 20-30 SPX points (about 2%+- for which I received many taunts) in October. There may be one more blast higher, but this rally looks about over.
A Word Of Thanks To Citigroup
I do want to thank Citigroup and Chuck Prince’s arrogance for calling the exact top in Citigroup and damn near doing it for the entire index as well. In addition, I want to thank Citigroup for providing plenty of entertainment since June of 2007, continuing even after Prince danced out the door. And with that idea in place, I formulated the title of this post. Typically I start with some sort of title in mind.
Citigroup (C), Ambac (ABK), and Countrywide Financial (CFC) have been standouts in providing entertainment. However, Ambac will soon be worthless, and Countrywide will be taken over by Bank of America (BAC). So Citigroup will have to carry the entertainment torch single handedly. All indications are that Citigroup will be up to the task.
One thing is nearly certain. The bottom in Citigroup is unlikely to occur as long as it foolishly clings to a dividend it cannot afford.
Mike “Mish” Shedlock
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