With Citigroup stock value plunging, top executives at the financial giant are considering the sale of all or parts of the company, the Wall Street Journal reported on its Web site late on Thursday.
The debate within the company is at a “preliminary stage,” and officials said the company has “ample capital, funding and strategic direction,” the daily said.
The sale option is one of a range of dire scenarios company executives were considering after Citigroup stock fell another 26 percent on Thursday, after a 23 percent drop on Wednesday.
The company’s board of directors was expected to meet yesterday to discuss options to reverse the stock slide, people familiar with the situation told the daily.
Citigroup, a component of the blue-chip Dow Jones Industrial Average, has tumbled more than 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis.
Chief executive Vikram Pandit and other company executives have told colleagues they are frustrated and confused by this week’s 50 percent stock decline, the daily said.
Citigroup stocks on Thursday closed at US$4.71, their lowest level in 15 years, despite Wednesday’s announcement by Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that he would increase his holdings in Citigroup Inc to 5 percent, adding that he supports the banking giant’s management.
“It’s not a significant strategic investment statement,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets. “And the question Wall Street is asking is, is this good money after bad?”
At US$25.6 billion, Citigroup’s value on the stock market is barely higher than the US$25 billion aid package the US Treasury extended it last month, in the framework of its US$700 billion bailout plan for stricken financial institutions. Besides considering selling the company to another bank, Citigroup executives are also looking into selling parts of the company, including the Smith Barney retail brokerage, the global credit-card division and transaction-services unit, Citigroup’s most lucrative and fast-growing businesses, the newspaper said.
They are also exploring the possibility of merging with a rival. Some analysts have pointed to Morgan Stanley and Goldman Sachs Group Inc as potential suitors, market analysts told the daily.
The stock plunge also raised the question of whether Citi will have to go begging for more cash from outside investors to calm its shareholders.
“I think they’ll have to raise a lot more money,” said Christopher Whalen, managing director of Institutional Risk Analytics.
“It’s almost like a self-fulfilling prophecy,” Kenny said. “The worry now is, how many future losses can Citi withstand, as a direct proportion of market cap?”
On Monday, Citigroup said it will be eliminating 53,000 jobs, on top of 22,000 cuts previously announced, to reduce costs. Then on Wednesday, the bank said it is acquiring the remaining US$17.4 billion in assets held by complex debt products known as structured investment vehicles that it previously ran off its balance sheet.
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