Citibank closes at $6.40
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Just FYI, if you want to value the stuff (UBS, Citigroup C for short) our swfs bought, value the convertibles as a bond and embedded option and add the result together. With regards to the reset clause embedded, for UBS it just merely sets the strike price of the option at the lower bound of CHF 51.48. UBS is trading at wow wow weeeeee CHF13.33, although it should recover a little (maybe to CHF 20, CHF 30 tops) when they convert at the end of the year. (I am being optimistic as I don't like seeing my money being wasted.) For C, although it is a perpetual bond, it's value is not infinite. Counter intuitive, but it is. http://en.wikipedia.org/wiki/Perpetuity Really cunning, the way Tony emphasised this bit of 'downside' protection.
Furthermore, there are so many clauses in that thing that can trigger a forced conversion. If push comes to shove and C blows up, who do you think will get paid first, the US Government or GIC? I think the answer is pretty obvious. And which one will blow up? Citi Holdings or Citicorp? If Citi Holdings blows up, how much of taxpayer's money is going to be lost? If GIC were feeling so generous as to give money to all those short sellers and investment banks out there, why can't they give it to the people of Singapore instead? In fact, what is the point of having so much in reserves if you are never going to use it to better the lives of your fellow Singaporeans? Looking at the way our reserves are run, I wonder whether do we really have that money. Maybe it was all lost in '97 and the situation is no better than the Madoff scam for all you know. Most likely there is really money in our reserves, but my point is we cannot know for certain as there is really no accountability at all. It is our money and we want to know how much there is! LKY's secrecy be damned! If money is lost so be it, it is our bad luck. After all we did elect PAP as government but hiding behind the curtain of secrecy is cowardly, to say the least.
Long term investments are really a gamble. Our great leader said he would hold on to these banking shares for 30 years. 30 years ago, GM and Ford were the largest car companies in the world. Right now, they are on their deathbeds. In fact, 14 years ago there was this investment bank called Barings. You guys probably know what happened to it. Can't our scholars see that if even Wall Street is negative on itself, it probably is fool hardy to enter such investments? It can be argued that if UBS or C does not blow up and the stock prices rise even at 1% a year, the face value of the investment will be made up. What must be considered in this case is the risk free rate, as measured by US Gov debt. The real value of those stakes would probably by eroded greatly by inflation. In other words, $1 could buy you a plate of chicken rice 30 years ago but not now. Furthermore, the profitibility of banks are going to be lower in the post credit crunch era, impeding share price growth. We may have to wait till the next generation before we see our surviving investments reach their par value. 30 years indeed.
Scholars make poor investors. Scholars go by the textbook, viewing the world through what they learnt from A BOOK. How anyone can invest or make business decisions in this manner is really beyond me. If they really want to do it by the book, invest in US bonds. Those have a far smaller chance of going wrong as compared to equity stakes. As the Hokkiens put it, lang ai kiang mai geh kiang.
For our investments, I can only hope that GIC and Temasek did buy some real downside protection aka put options or something, anything. I will really feel sorry for the Singapore taxpayer if all this money goes down the drain. 35 bil, even in Singapore doallars, is the sum of all our tax receipts in a year.
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Jim rogers say, GIC and temasek dont seem to him like smart ppl.
now we know, why billions has lost and temasek is desperate to sell off its assets to balance its book. such as Gencos
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Hi Mr lion noisy,
Similar Citibank Convertibles are trading at $8USD yielding 40%.
Convertibles also declines in valuation.
Source
http://www.nyse.com/about/listed/lcddata.html?ticker=cpri
Secondly if citibank defaults on paying dividends for many years, can GIC do anything?
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Originally posted by kilua:
Hi Mr lion noisy,
Similar Citibank Convertibles are trading at $8USD yielding 40%.
Convertibles also declines in valuation.
Source
http://www.nyse.com/about/listed/lcddata.html?ticker=cpri
Secondly if citibank defaults on paying dividends for many years, can GIC do anything?
yr info really help.
www.marketwatch.com/
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USD$1.50 now.... despite USG & GIC buying it...
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Originally posted by hmsg:
USD$1.50 now.... despite USG & GIC buying it...
Will buy when it drops below 1.20 :) -
i bought Citigroup options last friday, while stock price was trading at 1.61. Hopefully will go up from here .....
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The below post is taken from Zacks.com, an investment research website. Note words in red, and compare that to what we have read in yesterday's Business Times.
I have found the online version, and have copied it below the Zacks.com article.
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Citigroup 
Reconfigures Equity Component, But with Significant Dilution
Earlier today Citigroup (C) announced it will offer to convert into common shares approximately $27.5 billion of its preferred stock sold to public and private investors, and up to $25.0 billion in
preferred stock bought by the U.S. government. The U.S. government
would have approximately a 36% stake in Citigroup, while existing
shareholders would be cut to a 26% stake, if fully executed.
The bank is suspending its payment of dividends on preferred stock. And though the common shareholders have to approve the deal, they do not have much choice, as Citigroup will issue securities to preferred shareholders who agree to the swap that let them buy common stock for a penny a share if shareholders don't approve the deal.
The Treasury would only participate in the conversion once other preferred shareholders (predominately sovereign wealth funds) participated. So far, the Government of Singapore Investment Corp. and Saudi Prince Alwaleed Bin Talal have agreed to participate in the exchange.
While the conversion would not involve any additional government investment, under this maximum conversion scenario the primary result would be a significant increase in its tangible common equity and boost its tangible common equity ratio.
However, Citigroup will still have to endure a "stress test" (which examines a bank's ability to withstand various economic scenarios). Once the test will have been completed, Citicorp would still be required to raise additional capital, which could create to potential for additional dilution.
This move makes the U.S. government the largest shareholder of the bank, and will probably play a much more active role in shaping the bank’s direction. It is a form of nationalization, whatever it may be termed by the Government. As a result of the deal, the stakes of existing common shareholders have been severely diluted. We expect the shares will remain under pressure.
We suspect Government will end up acquiring a substantial stake in the many other banks which will be required to rebuild their capital after the stress tests, as private capital will not be easy to come by. As such, we advise investors totally avoid those banks which are perfect candidates for capital infusion by the Government after the stress tests, like Bank of America (BAC), U.S. Bancorp (USB), PNC Financial Services Group (PNC) and Wells Fargo (WFC). -
ARTICLE IN BUSINESS TIMESGIC cuts loss in one fell swop
Conversion of its Citigroup preferred shares into common stock will pare paper loss from US$5.5 billion to US$1.67 billion
By CONRAD TAN
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Print article 
Feedback THE Government of Singapore Investment Corp (GIC) will convert all its preferred shares in Citigroup into common stock to cut its losses. The swop will give it an 11.1 per cent stake in the troubled US bank, which yesterday announced a sweeping plan to boost its common equity base. The conversion will pare GIC's paper loss on its original US$6.88 billion investment in Citi from 80 per cent or US$5.5 billion to 24 per cent, or US$1.67 billion, based on Thursday's closing price of US$2.46 for Citi shares.
BOOSTING TCE
Citi says the share conversion plan has just one goal - to increase the bank's tangible common equitySeparately, Citi said yesterday that it plans to swop up to US$52.5 billion of its preferred stock, including US$25 billion of the US$45 billion held by the US government, for ordinary shares.
Citi also recorded a massive US$10 billion charge for impairment of goodwill and other intangible assets in the fourth quarter, resulting in an additional net loss of US$9 billion for the final three months of last year.
For GIC, the decision to convert its shares appears to have been the lesser of two unpalatable choices. Citi yesterday suspended dividend payments on its preferred shares as well as common stock, which means that GIC would lose the 7 per cent annual dividend that it has been receiving if it chose not to convert its holdings.
The conversion will make GIC the second-biggest shareholder in Citi with a stake of about 11 per cent, compared to about 4 per cent at the time of its original investment. The US government will be Citi's largest shareholder, owning 36-38 per cent of Citi's common equity. The final stakes will depend on how many investors in the publicly held tranche of Citi's preferred stock decide to participate in the share conversion.
Related links: 
Click here for Citi's news release Citi's goodwill announcement Statement from Citi chairman GIC's news release One thing is certain: Existing ordinary shareholders will suffer massive dilution of more than 70 per cent. Citi shares plunged 37 per cent to US$1.55 at the start of US trading yesterday after the bank's announcement. At that price, GIC's unrealised loss on its Citi investment would be US$3.6 billion. The profitability of US banks 'is likely to be impaired in the next two years', said Ng Kok Song, GIC's group chief investment officer in a statement.
'GIC's view is that with this latest move, Citigroup's capacity to weather the severe economic downturn will be strengthened.'
Before yesterday's announcement, the market value of the preferred shares held by GIC had already slumped 80 per cent to just US$1.376 billion since its initial investment in Citi, as mounting losses made it less likely that the bank would be able to keep up its dividend payments.
The US government, GIC and other investors that bought Citi preferred stock alongside GIC in January last year will receive common stock at a price of US$3.25 a share. Those investors, including Saudi Arabia's Prince Al-Waleed bin Talal, have agreed to the exchange, said Citi.
At the conversion price of US$3.25, GIC will get some 2.12 billion common shares in exchange for its US$6.88 billion in preferred stock. Based on Thursday's closing price of US$2.46 a share, GIC's stake after conversion is worth US$5.21 billion.
That puts GIC's unrealised loss on its original US$6.88 billion investment in Citi at US$1.67 billion after the conversion, compared to US$5.5 billion before.
Under the original terms of GIC's investment in Citi, it would have had to pay a much higher conversion price of US$26.35 for each common share, GIC said. That would have translated into a stake of just 261.1 million shares, worth a mere US$642 million at Thursday's closing price for Citi shares.
But the conversion also means that GIC will now bear greater risk than before, as an ordinary shareholder. It also gives up for good the 7 per cent annual dividend that it previously earned on its preferred shares.
Citi chief executive Vikram Pandit said that the conversion plan had just 'one goal' - to increase the bank's tangible common equity or TCE. Converting its preferred shares into ordinary equity will boost its TCE ratio - the focus of stress tests by US regulators starting this week as a key measure of the bank's ability to withstand further losses if the recession is worse than expected.
Ordinary shareholders are the first to suffer any losses, so common equity is seen as the highest quality of capital that a bank holds, and the size of a bank's common equity base relative to its assets is considered the purest measure of its buffer against losses.
The hope is that by raising its TCE ratio, Citi will be able to weather the worst recession that the US has seen in decades. The plan is expected to increase its TCE as a proportion of its risk-weighted assets from less than 3 per cent now to 7.9 per cent.
Crucially, it does so without the need to inject more money from the public purse. That makes it unnecessary for the US government to seek the approval of lawmakers for more funds amid growing public fury over the use of taxpayers' money to bail out large banks.
But the US government could still inject more capital into Citi - in the form of mandatory convertible preferred shares - if the stress tests show that the bank's capital cushion still needs bolstering. That would mean further dilution for ordinary shareholders, including GIC, when the shares are eventually converted to common stock.
'As a shareholder, GIC supports the initiative by Citigroup and the US government to strengthen the quality of the bank's capital base in view of the challenging economic environment,' GIC said in a statement.
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Originally posted by maxtor:
i bought Citigroup options last friday, while stock price was trading at 1.61. Hopefully will go up from here .....
...how much did you pay for it, what is the strike price and when does it expire?
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Originally posted by AndrewPKYap:
...how much did you pay for it, what is the strike price and when does it expire?
I got them at 55 cents, strike at $2.50, expiry in January 2010. Wanted to buy the January 2011 expiry ones but they were too expensive...
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less than US$1!!!
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less then a dollar now..time to whack
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Stocks Could Skyrocket After March 12th
Investors such as Jon Najarian are hopeful that stocks could soar next week. They say we could see an explosion to the upside after a meeting scheduled for March 12th.
On that date, a House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs.
Karen Finerman has long been an advocate of putting these rules on hiatus for a while and “letting the banks breathe.”
If that meeting results in the government relaxing mark-to-market rules, optionMonster Jon Najarian thinks the stock market could explode. On Wednesday he told us, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”
And he went on to say, “In fact, I hope you’ll replay the soundbite because if the government relaxes mark-to-market accounting a number of banks stocks will be unbelievable values at these levels.”
Consider the soundbite replayed. (Click here to read that full article.)
Background
U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is undermining the government's multibillion-dollar effort to stabilize the financial sector.
Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period.
What's the trade?
Jon Najarian suggests a higher risk play – he suggests long the Financial Bull 3x ETF [FAS 2.64
-0.11 (-4%) 
]
which is triple long ahead of the mark-to-market hearing.---------------------------------------------------------------
watch out for this date, as the stock market will probably rally.
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Originally posted by reyes:
Stocks Could Skyrocket After March 12th
Investors such as Jon Najarian are hopeful that stocks could soar next week. They say we could see an explosion to the upside after a meeting scheduled for March 12th.
On that date, a House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs.
Karen Finerman has long been an advocate of putting these rules on hiatus for a while and “letting the banks breathe.”
If that meeting results in the government relaxing mark-to-market rules, optionMonster Jon Najarian thinks the stock market could explode. On Wednesday he told us, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”
And he went on to say, “In fact, I hope you’ll replay the soundbite because if the government relaxes mark-to-market accounting a number of banks stocks will be unbelievable values at these levels.”
Consider the soundbite replayed. (Click here to read that full article.)
Background
U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is undermining the government's multibillion-dollar effort to stabilize the financial sector.
Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period.
What's the trade?
Jon Najarian suggests a higher risk play – he suggests long the Financial Bull 3x ETF [FAS 2.64
-0.11 (-4%) ] which is triple long ahead of the mark-to-market hearing.---------------------------------------------------------------
watch out for this date, as the stock market will probably rally.
sigh....
That's only delaying the inevitable. When you drop mark to market accounting, the banks will only be inflating the values. People may be stupid and accept the figures, but the sharks arent stupid.
Sharks are the numerous ponzi schemers still hiding under the low tide of the inevitable stock market collapse, short selling now to survive waiting for such ponzi methods of accounting.
They would have learnt their lessons by now, and they only want to get out alive and not clapped in chains. When the stock figures rise, they will sell and get out of the market. When they sell, the stock market will collapse again. Madoff's scam was $60billion. How many more others who cook their books but did not confess as Madoff did, who escape SEC investigations?
The inevitable will come. Best let the stock market be destroyed. New ways of obtaining capital will have to be found for better honesty. The stock market casino had failed humanity through its greed. We this generation must pay the price and not let our next and future generations be doomed.
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who said they wanted to buy when citigroup drops to $1???
it's $1 !!! do u still dare to buy ????
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Originally posted by reyes:
Stocks Could Skyrocket After March 12th
Investors such as Jon Najarian are hopeful that stocks could soar next week. They say we could see an explosion to the upside after a meeting scheduled for March 12th.
On that date, a House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs.
Karen Finerman has long been an advocate of putting these rules on hiatus for a while and “letting the banks breathe.”
If that meeting results in the government relaxing mark-to-market rules, optionMonster Jon Najarian thinks the stock market could explode. On Wednesday he told us, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”
And he went on to say, “In fact, I hope you’ll replay the soundbite because if the government relaxes mark-to-market accounting a number of banks stocks will be unbelievable values at these levels.”
Consider the soundbite replayed. (Click here to read that full article.)
Background
U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is undermining the government's multibillion-dollar effort to stabilize the financial sector.
Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period.
What's the trade?
Jon Najarian suggests a higher risk play – he suggests long the Financial Bull 3x ETF [FAS 2.64
-0.11
(-4%)
] which is triple long
ahead of the mark-to-market hearing.---------------------------------------------------------------
watch out for this date, as the stock market will probably rally.
Wow thanks for the tip... will study if there is anything to it... but of course, they might not change the marked to market rules... and decide that it is better to just PRINT MORE MONEY.
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aiyah, i should have bot some last thursday when it went sub-$1 at 0.97cents.
luckily nowdays they don de-list wan is it?
luckily i did not buy also. i realise that its future may be uncertain.
some people are suggesting to buy AIG shares.
any advice, pundits?
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Some of you people are just like ah soh and ah peks shopping for meat at the wet market.
wah so cheap... buy! buy! buy!
hello, if it is selling for $1.00, there are reasons why it is selling for $1.00
If it is selling for $10.00
There are reasons why it is selling for $10.00
You take home the meat and put it under the mnicroscope, the lelong lelong cheap meat you might find, is uneatable.
Why don't you put all these stocks under the microscope then decide whether to buy or not and decide which ones to buy. What you will find is that there are so many things unknown, unknowable and you are just delusional for being so sure about it.
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Originally posted by maxtor:
I got them at 55 cents, strike at $2.50, expiry in January 2010. Wanted to buy the January 2011 expiry ones but they were too expensive...
By the sounds of it, you invested in an American call. On the back of the vols witnessed lately, I'm not sure if there's much of an opportunity for you to make significant profits from it (if at all).
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my friend who had invested a lot in citi says his balloons are now caught between a hard rock and a slap of steel-re-inforced concrete.
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When a politician dont do their job n try to be a businessman,they will tend to screw up.
Take a look a LKY,LHL n boot-licker GCT now u will know why.
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Originally posted by likedatosocan:
my friend who had invested a lot in citi says his balloons are now caught between a hard rock and a slap of steel-re-inforced concrete.
your friend can take comfort that he is in the league of lky.
lky also invested a lot, but of course not his own money, in citi.
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Originally posted by AndrewPKYap:
Some of you people are just like ah soh and ah peks shopping for meat at the wet market.
wah so cheap... buy! buy! buy!
hello, if it is selling for $1.00, there are reasons why it is selling for $1.00
If it is selling for $10.00
There are reasons why it is selling for $10.00
You take home the meat and put it under the mnicroscope, the lelong lelong cheap meat you might find, is uneatable.
Why don't you put all these stocks under the microscope then decide whether to buy or not and decide which ones to buy. What you will find is that there are so many things unknown, unknowable and you are just delusional for being so sure about it.
U have a point. I have met far too many people thinking that stocks n shares are like day to day commodities. 50% off the top = 50% discount. Therefore buy. IF ONLY things were so simplistic.
Btw, reminds me of a certain SWF .....