GIC coverts citigroup prefered shares......

[Wind30]

 

 

SINGAPORE, Feb 27 (Reuters) - Sovereign wealth fund the Government of Singapore Investment Corp (GIC) said on Friday it will convert its Citigroup (C.N: Quote, Profile, Research) preferred shares into common stock in a bid to shore up the troubled U.S. lender.

 

GIC said it would exchange its convertible preferred notes to common stock at a price of $3.25 a share. Based on Citi's opening share price of $1.67 on Friday, GIC has realised a loss of around half its investment. This also compares with the conversion price of $26.35 under the terms of the original investment.

 

 

so based on 1.67, we already lost 50% of our investment. And now all the investment is in common stock which is SUPER risky.

 

This is CRAZY. I think this investment in citigroup must be the WORST ever for GIC.

 

U can still argue that investing in prefered stock has less risk due to the 7% dividends and all the downside protections.... but now we end up with 50% paper loss + HUGE risk increase.....

 

I noticed the ST report is so stupid. They used the US$2.5 price to calculate and say paper loss is only around twenty something percent. And then at the end of the article they say citi share price drop to $1.5. Why they don't use the latest price to calculate the GIC loss????????

[Emkay]

I noticed the ST report is so stupid. They used the US$2.5 price to calculate and say paper loss is only around twenty something percent. And then at the end of the article they say citi share price drop to $1.5. Why they don't use the latest price to calculate the GIC loss????????

 

 

if they did, you wouldn't be able to read about it on ST

[Klinz]

I'm not an expert in investment but I think this investment call is seriously risky...as one might have read about the US bank might be nationalised....that means paper loss not paper loss anymore but actual loss!!!

[Tsammyc]

The investment is indeed risky, but GIC has ended up buying 11% of Citigroup, a major international bank, at USD3.25. Not so long ago, it traded at USD60, so they got a good price. The price is also the same price that the US Government is getting. Right now, Citi's price is artificially depressed by hedge funds and other short sellers. The value of the whole company is actually less than OCBC now, which doesn't make sense because Citi's franchise value is hundreds or thousands of times bigger than OCBC. If in say, 10 years, Citi goes back to USD60, the return would be 1800%.

 

I for one hope that GIC actually succeeds in its investment in Citi because GIC generates the returns that pay the 4% on our CPF Special and Medisave accounts. I wouldn't want those cut. The Ordinary account is handled by returns from HDB (which is why the HDB loan rate is linked to the CPF rate).

[Hishercar]

is there conflict of interest

 

GIC and Citigroup adviser is LKY

 

 

[Blackyv]

this is a very high risk investment and of cause, the potential very high returns.... if i have extra cash, i will buy it...

just like when AIG was in trouble, i did told my friend if i have cash, i will buy......but too bad, i have no extra cash to burn...

[Nhyone]

The investment is indeed risky, but GIC has ended up buying 11% of Citigroup, a major international bank, at USD3.25. Not so long ago, it traded at USD60, so they got a good price. The price is also the same price that the US Government is getting.

 

Good price?

 

Let's see. The US Government owns $45bil in preference shares. If it converted based on the current market share, it should get 80% of the company, but now it gets just 40%. If this is not outright bailout, I don't know what it is. The US taxpayers are scammed. Obama talks smooth, but acts just like Bush.

 

Right now, Citi's price is artificially depressed by hedge funds and other short sellers. The value of the whole company is actually less than OCBC now, which doesn't make sense because Citi's franchise value is hundreds or thousands of times bigger than OCBC. If in say, 10 years, Citi goes back to USD60, the return would be 1800%.

How about its liabilities? There are rumors that Citigroup is actually insolvent.

[Celicar]

I'm not an expert in investment but I think this investment call is seriously risky...as one might have read about the US bank might be nationalised....that means paper loss not paper loss anymore but actual loss!!!

 

I'm nowhere near an expert to but it seems to me that GIC is 'paying' for the new shares at a price higher than present market value, no? I think I read somewhere that GIC does not have to pay further to get the shares, but it seems like they are being 'forced' to accept shares at a marked-up price when they could go into the open market and get them at cheaper. If you're telling me that GIC has something to gain which they would otherwise not gain by buying from the opening market, then maybe a case can be made for the conversion, but they are in fact giving up the 7% dividends by this conversion PLUS get less shares for the same amount of money than they would otherwise get by NYSE market purchase.

 

Yesterday's low was USD1.40 some more.

 

At the end of the day, no point trying to rationalise it, because there is more than money at play. Underlying motivation?

 

POLITICS!

 

 

[Chongster]

The investment is indeed risky, but GIC has ended up buying 11% of Citigroup, a major international bank, at USD3.25. Not so long ago, it traded at USD60, so they got a good price. The price is also the same price that the US Government is getting. Right now, Citi's price is artificially depressed by hedge funds and other short sellers. The value of the whole company is actually less than OCBC now, which doesn't make sense because Citi's franchise value is hundreds or thousands of times bigger than OCBC. If in say, 10 years, Citi goes back to USD60, the return would be 1800%.

 

I for one hope that GIC actually succeeds in its investment in Citi because GIC generates the returns that pay the 4% on our CPF Special and Medisave accounts. I wouldn't want those cut. The Ordinary account is handled by returns from HDB (which is why the HDB loan rate is linked to the CPF rate).

 

you can't compare the price of a share after dilution to the price before dilution, and call it a good price. if not, you would be buying shares after every share split.

 

The US govt needs to bail out a US bank, but why is GIC in it with them.

 

GIC bought shares at 3.45/share when it is trading at $1.50 and gave up 7% fixed dividend and you call it a good deal. you want to buy my car?

 

citi is heavily involved in the CDS game, which is the next shoe to drop.

 

[Celicar]

you can't compare the price of a share after dilution to the price before dilution, and call it a good price. if not, you would be buying shares after every share split.

 

The US govt needs to bail out a US bank, but why is GIC in it with them.

 

GIC bought shares at 3.45/share when it is trading at $1.50 and gave up 7% fixed dividend and you call it a good deal. you want to buy my car?

 

citi is heavily involved in the CDS game, which is the next shoe to drop.

 

I agree it is a skewered price comparison. Whichever way I slice it, I can't see how it is a good deal. At say USD0.60 then maybe (what it does to the open market price of Citi shares is another story), but I think it's more a case of LPPL deal than a good deal.

 

The losses on this investment is eye-popping. And don't tell me it is paper loss, long-term investment, all that BS. I really wonder how these losses, if not incurred but somehow found their way into the budget, how much better off the man-in-the-street would have been.

 

Haiz.

 

 

[Cheekg98]

The investment is indeed risky, but GIC has ended up buying 11% of Citigroup, a major international bank, at USD3.25. Not so long ago, it traded at USD60, so they got a good price. The price is also the same price that the US Government is getting. Right now, Citi's price is artificially depressed by hedge funds and other short sellers. The value of the whole company is actually less than OCBC now, which doesn't make sense because Citi's franchise value is hundreds or thousands of times bigger than OCBC. If in say, 10 years, Citi goes back to USD60, the return would be 1800%.

 

I for one hope that GIC actually succeeds in its investment in Citi because GIC generates the returns that pay the 4% on our CPF Special and Medisave accounts. I wouldn't want those cut. The Ordinary account is handled by returns from HDB (which is why the HDB loan rate is linked to the CPF rate).

 

agree ... shortsellers attacking Citi now ... guess it's a confidence crisis now ... will take a while for Citi to recover ... maybe the future POSB in US ?

 

Local banks also not in good shape ... with the singapore economy in recession, they will be badly hit too ...

Edited February 28, 2009 by Cheekg98

[Klinz]

agree ... shortsellers attacking Citi now ... guess it's a confidence crisis now ... will take a while for Citi to recover ... maybe the future POSB in US ?

 

Local banks also not in good shape ... with the Singapore economy in recession, they will be badly hit too ...

 

 

If Citi become POSB of US.....GIC losses will be realized than as per claimed paper losses as I think nation bank has to be delisted...

 

Local banks also jialak because of IR construction and properties, all $$$ kenna locked ...remember SAND is in cash flow issue now....if construction stop...hell break loose....

 

Singapore economy is already [sweatdrop] , instead of boosting morale, they keep on investing and then reporting losing taxpayers' $$$.... But not to forget the paper loss already wipe out the gain in the last ten years....(not to mention the last 4 yrs of crazy bull market which might inflate the gain).

The loss of $$$ need accountability.

 

IMHO, It's time to evaluate is this investment is visible as is the $$$ better to invest in R&D for technology (eg,in green energy, resource efficient HDB flats, better education system, or maybe nursing home...etc)

 

[Drive_carcar]

The investment is indeed risky, but GIC has ended up buying 11% of Citigroup, a major international bank, at USD3.25. Not so long ago, it traded at USD60, so they got a good price. The price is also the same price that the US Government is getting. Right now, Citi's price is artificially depressed by hedge funds and other short sellers. The value of the whole company is actually less than OCBC now, which doesn't make sense because Citi's franchise value is hundreds or thousands of times bigger than OCBC. If in say, 10 years, Citi goes back to USD60, the return would be 1800%.

 

I for one hope that GIC actually succeeds in its investment in Citi because GIC generates the returns that pay the 4% on our CPF Special and Medisave accounts. I wouldn't want those cut. The Ordinary account is handled by returns from HDB (which is why the HDB loan rate is linked to the CPF rate).

 

I agree with you. Citi is grossly undervalued at this point of time. Eventually world economy WILL recover, and the value of their Citi shareholdings would be entirely different.

 

And if the world economy really crashed and burned and never ever recover, it doesn't matter what they had done, or are doing now anyway. Everything would be turned to dust.

 

So I'm coming from the premise, how much worse can it get anyway, if it gets any worse, everybody, you, me, all would be broke, which is not likely to happen.

[Wind30]

so u think u are better than the market? Is citi under valued?

 

It is priced at US$1.50 now.... any tom dick and harry can buy in Citi at $1.50 now.....

 

Will GIC buy at $1.50??? flat no.... because it is just too risky.

 

Citibank is hardly something we want our reserves to be invested in.... According to ST, GIC only had 7% returns per annum for the past 20 years..... the returns are pretty modest due to the fact that they are not supposed to invest in high risk stuff.

 

somehow someone poured in billions into the US banks....

[Duckduck]

so u think u are better than the market? Is citi under valued?

 

It is priced at US$1.50 now.... any tom dick and harry can buy in Citi at $1.50 now.....

 

Will GIC buy at $1.50??? flat no.... because it is just too risky.

 

Citibank is hardly something we want our reserves to be invested in.... According to ST, GIC only had 7% returns per annum for the past 20 years..... the returns are pretty modest due to the fact that they are not supposed to invest in high risk stuff.

 

somehow someone poured in billions into the US banks....

 

Totally agree.which is why will never open their books. S$9bn cld have been given back to us as GST rebate credits or something... now its all gone>... unless citi share price go back to 3.25 whihc means breakeven haha!

 

[Silver_blade]

Just to check.

 

If Citibank kenna nationalised. Which type of share will become worthless....preferred share or common share..or both?

 

Thanks.

[Hishercar]

GIC is bidding for AIG insurance unit

[Chongster]

Just to check.

 

If Citibank kenna nationalised. Which type of share will become worthless....preferred share or common share..or both?

 

Thanks.

 

it depends on what the mechanics of the "nationalization" is. if it is a straightforward takeover of the company, then all classes of equity should become worthless.

 

if the US govt takes over a big chunk of the company through issuance of new common shares, existing common shares would be diluted to pittance (but not worthless) and preference should not be affected.

 

if the US govt takes over enough of the company to delist it, existing common shares becomes illiquid, and for small shareholders might be as good as worthless.

 

if the US govt only takes over say 60% of citi, and start having a bigger say, that to many western analysts is a nationalization of sorts. BUT we have been doing that for years with DBS! that's probably the best case scenario, but we have not seen the last of the citi saga yet. it's CDS exposure is massive, and it's not a coincidence that AIG and Citi are in sh*t again at almost the same time...

 

sigh, i have a thread when Lehman first broke to say that Citi may be next in big trouble, and some id*ot came to pick issue rudely; wonder how to retrieve the thread and where that id*ot is now.