Citigroup is no AIG
The question all investors ask themselves is, “can I make a profit.” One company that has had some surprising stories come out of it, profitwise, is Citigroup. Citigroup has been beleaguered with horror stories, culminating in it having to take TARP money. Currently any sound investor that invests in a TARP recipient is trying to flee the sinking ship. However, unlike AIG, citigroup is not in the same boat. There are some great stories of profits being made over at Citigroup.
The latest example is the Kuwait Investment Authority (KIA) – a sovereign wealth fund — that made a $1.1billion profit by selling its stake in Citigroup on Sunday. KIA invested $3 billion in Citigroup in 2008, as the Wall Street lender was reeling from subprime losses. Over the weekend, the KIA converted its preferred shares into common shares and sold them for a profit.
Government of Singapore Investment Corp. earned a $1.6 billion profit on its Citigroup investment in September. The Singapore government fund exchanged $6.88 billion of convertible preferred stock for Citigroup common shares at $3.25 apiece on Sept. 11. Singapore closed this deal in January 2008, which also included a $3 billion investment from former Citigroup CEO Sandy Weill, the State of New Jersey and Saudi Prince Alwaleed Bin Talal. With Citigroup trading this morning at $4.09, these investors are likely to earn a profit, if they sell their shares.
Through TARP we, the U.S. taxpayer, own 34% of Citigroup common shares, and are on track for a big profit. The government converted its preferred shares into common stock at $3.25 a share – at the same price as Singapore conversion. That means the government’s 7.7 billion shares have gained about $3 billion.
Abu Dhabi Investment Authority didn’t fare nearly as well. The Emerite pumped $7.5 billion into Citigroup in 2007, when the bank first began reeling from the credit crisis. Now, Abu Dhabi will soon start purchasing $7.5 billion of Citi shares, but at $31.83 a piece, or about eight times the current market value.