Citi Warrants

[junto.investing]

Just came across this article:

 

http://www.marketwatch.com/story/financials-lower-treasury-to-sell-citi-warrants-2011-01-24?siteid=yhoof

 

Has anyone been following this? If so, do you know if the warrants will be available to retail investors?

 

Thanks in advance.

[A_Hamilton]

I don't know if they will be available to retail in the initial offering, but certainly in the secondary market.

 

From the prospectus: Citigroup has applied to list the warrants on the New York Stock Exchange under the symbol “C WS B."

[A_Hamilton]

Read a little bit more detail. The series B “C WS B." are pretty far out of the money.

"The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 210,084,034 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $17.85 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on October 28, 2018."

 

Quarterly dividends need to be in excess of $0.16 in order to get a reduction in the strike price.

 

The other set (Class A) are also out of the money, but not nearly as far.

 

The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 255,033,142 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $10.61 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on January 4, 2019.

Citigroup originally issued 188,501,414 warrants to Treasury in a private placement in connection with Citigroup’s participation in the Targeted Investment Program, or TIP, under the Emergency Economic Stabilization Act of 2008, or EESA, and issued 66,531,728 warrants to Treasury in a private placement in connection with a loss-sharing agreement among Citigroup, Treasury and the Federal Deposit Insurance Corporation, or FDIC. Prior to this offering, there has been no public market for the warrants. Citigroup has applied to list the warrants on the New York Stock Exchange under the symbol “C WS A.” The Common Stock is listed on the New York Stock Exchange under the symbol “C.” On January 21, 2011, the last reported sale price of the Common Stock on the New York Stock Exchange was $4.89 per share.

 

Additionally, the exercise price of, and the number of shares underlying, the warrants will not be adjusted for any regular quarterly cash dividends that are in the aggregate less than or equal to $0.01 per share of Common Stock, which is the amount of the last dividend per share declared prior to the date on which the warrants were originally issued to Treasury

 

 

[junto.investing]

Read a little bit more detail. The series B “C WS B." are pretty far out of the money.

"The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 210,084,034 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $17.85 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on October 28, 2018."

 

Quarterly dividends need to be in excess of $0.16 in order to get a reduction in the strike price.

 

The other set (Class A) are also out of the money, but not nearly as far.

 

The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 255,033,142 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $10.61 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on January 4, 2019.

Citigroup originally issued 188,501,414 warrants to Treasury in a private placement in connection with Citigroup’s participation in the Targeted Investment Program, or TIP, under the Emergency Economic Stabilization Act of 2008, or EESA, and issued 66,531,728 warrants to Treasury in a private placement in connection with a loss-sharing agreement among Citigroup, Treasury and the Federal Deposit Insurance Corporation, or FDIC. Prior to this offering, there has been no public market for the warrants. Citigroup has applied to list the warrants on the New York Stock Exchange under the symbol “C WS A.” The Common Stock is listed on the New York Stock Exchange under the symbol “C.” On January 21, 2011, the last reported sale price of the Common Stock on the New York Stock Exchange was $4.89 per share.

 

Additionally, the exercise price of, and the number of shares underlying, the warrants will not be adjusted for any regular quarterly cash dividends that are in the aggregate less than or equal to $0.01 per share of Common Stock, which is the amount of the last dividend per share declared prior to the date on which the warrants were originally issued to Treasury

 

 

 

Thanks Hamilton. It will be interesting to see where these things trade in the secondary market...

[rogermunibond]

These are trading today in volume.

 

c-wta and c-wtb on Yahoo

[junto.investing]

These are trading today in volume.

 

c-wta and c-wtb on Yahoo

 

initial thoughts?

[rogermunibond]

The c-wtb have a $17.85 strike and I think you have to make heroic assumptions to get C shares close to that strike before 2018.  But I'd have to think about it again if they were priced around 5 to 10 cents.

 

c-wta are a decent return (10%).  If C trades at $12.61 by 2018 then you have double.