The US Treasury will offer for sale 1.5 billion shares of Citigroup Inc. (NYSE:C) of the 3.6 billion shares it still holds in the bank. The sale of the common stock will stop on December 31st, even if not all the shares are sold to accommodate a blackout period ahead of Citi’s quarterly earnings release in early 2011.
The Treasury pumped $25 billion into Citigroup during the financial crisis in exchange for 7.7 billion shares of the bank and has so far recovered about $16.4 billion on sales of 4.1 billion shares. If this round of sales is completed at Citi’s current share price of $4.18/share, the government will have recovered $23 billion of its original investment and still hold 2.1 billion shares in the bank.
Recovering the government’s investment in Citigroup is far less complicated than recovering the $180 billion the Treasury put into American International Group, Inc. (NYSE: AIG). AIG has been forced to sell off some of its best assets and still needs to exchange $49.1 billion in Treasury-owned preferred shares for about 1.655 billion shares of AIG common stock.
What both the Citigroup and AIG investments have in common is that both are very likely to result in a net gain for the US Treasury and US taxpayers. The irony, of course, is that Troubled Asset Relief Program, TARP, has been a political loser for the Obama administration while at the same time being one of its biggest successes. The government investments in General Motors and Chrysler are likely never to be repaid.
Paul Ausick
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