Reverse Stock Split to Save Citi?

Citi fighting to survive

The Associated Press reports from New York that Citigroup Inc.plans to stimulate the count of outstanding common shares and turn a reverse stock split. This will be a key element of the financial services company’s  goal to convert preferred shares to common shares. Early trading following the announcement reflected a share increase of more than 10 percent.

This is all part of Citi’s plan to exchange around $27.5 billion in public and private preferred securities as part of its agreement with the Treasury, which has promised to match up to $25 billion of the conversions. This will be the government’s third cash advance try in five months to keep Citi from sinking beneath the waves.

How will this break down?

All private holders of convertible preferred securities, valued at $12.5 billion, have OKed the swap. The bank will also offer holders of non-convertible preferred and trust preferred securities the option to exchange. Currently, the conversion price is $3.25 per share. The number of common shares will increase significantly following this exchange. Ultimately, Citibank’s capital will benefit to a large degree. Citigroup had gone under $1 per share earlier in March as fears that government bailout efforts wouldn’t be enough. ... click here to read the rest of the article titled "Reverse Stock Split to Save Citi?"