Citigroup had considerable hardship in early 2009. The end of 2008, the Bank had $ 45 billion in preferred shares accepted by the Government of the United States through the Troubled Assets Relief Program (TARP). Nevertheless, the stock had continued slide in the spring of 2009. End of February, the company announced that it is to convert as much as $ 50 billion in preferred shares into common shares at $ 3.25 per share. The case asks students to rate the prices of preferred stocks over common stock at this tim … Read more »

Citigroup had considerable hardship in early 2009. The end of 2008, the Bank had $ 45 billion in preferred shares accepted by the Government of the United States through the Troubled Assets Relief Program (TARP). Nevertheless, the stock had continued slide in the spring of 2009. End of February, the company announced that it is to convert as much as $ 50 billion in preferred shares into common shares at $ 3.25 per share. The case asks students to evaluate the prices of preferred stocks over common stock at this time. As is the case during a period of considerable uncertainty in global capital markets and conventional sources of arbitrage funds were depleted, the apparent mispricing may not be as attractive as it first seems. In the B and C cases, the student must decide whether they think that the corresponding price changes when the apparent mispricing worsens. A final additional teaching point refers to the formation of a synthetic short position based on the markets settings.
«Hide

from
Robin Greenwood,
James Quinn
Source: Harvard Business School
14 pages.
Release Date: 6 July 2009. Prod #: 210009-PDF-ENG
Citigroup exchange offer HBR case solution