Citigroup’s $550 Share Price

Citigroup (NYSE: C) reverse split its stock and each stockholder with 10 shares got one. That took the price of Citi to $44. No one was fooled by the action. The big bank’s stock was worth, on the split basis, $550 four years ago. Citigroup is still Citigroup, the wretched and troubled financial firm which was irreparably damaged by the credit crisis and will never fully recover.

Split or not, the bank’s shares have barely budged since August 2009. Successful rival JPMorgan’s (NYSE: JPM) stock has done much better over the last two years

Citi’s large financial supermarket operation has lost much of its strength. It is not a powerhouse in investment banking or M&A. Its global retail business has done fairly well. Its forays into proprietary trading and private equity have not yielded much.

Reverse splits are often used as a way to lure institutional investors who cannot hold shares which trade for under $5. But, these investors do not appear to have any interest in Citi even now that they can buy it. The value of the stock dropped 2% on its first day of trading. Wall St. views the shares as fully valued. Otherwise, they would have traded higher a long time ago. Citi’s trading volume is among the largest of any stock listed on a large US exchange. The short position in the stock, at 381 million shares,  is also among the largest. The gambles that Citi’s shares will fall because of balance sheet or earnings trouble are substantial.

Citi is still one of the substandard large American financial companies. Its challenges to the institutional businesses of Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and many large foreign banks are no longer realistic, and it competes with Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), and a number of smaller financial firms in the retail bank and investment market. It has nowhere to move to be outstanding.

Douglas A. McIntyre