The US government says it will start selling the first chunk of its Citigroup stock, worth around 37 billion dollars, as it seeks to claw back some of the $700 billion of taxpayers' money used to bail out the global financial system.
AFP - The US government announced Monday it would start selling 1.5 billion shares in Citigroup, as it begins one of the biggest stock sales in history.
It is the first block sale of Citigroup shares held by the government, which has begun to wind-up crisis investments in the hope of recouping taxpayers' cash.
"The US Department of the Treasury today announced the next steps in its plan to sell approximately 7.7 billion shares of Citigroup common stock," a statement said.
The US government owns around a quarter of the firm and shares worth around 37 billion dollars at Monday's pre-market rates.
"Treasury will begin selling its common shares in the market in an orderly fashion under a pre-arranged written trading plan," a statement said.
The prospect of 1.5 billion shares flooding the market sent Citi's stock price sliding over four percent as the Treasury tried to limit loses.
"We can sell today, it doesn't mean that we will," said a Treasury official trying to keep plans under wraps.
But despite the early losses, analysts said the Treasury's announcement would not radically alter the outlook for Citi.
"We expect gradual sales at market prices," said Matthew Albrecht, a financials analyst at Standard & Poor's Equity Research, maintaining his recommendation that clients buy Citi shares.
The announcement comes as Washington tries to claw back the 700-billion-dollars of taxpayers' money used to prevent the collapse of the global financial system in 2008.
At the depths of the crisis, the government injected a total of 45 billion dollars into Citi, once the world's biggest banking group.
The New York-based company faced massive losses in the wake of the mortgage crisis and came perilously close to seeing a run on its deposits as confidence in the system collapsed.
Despite repaying some 20 billion dollars to the authorities in December, Citi is still one of the last of the major banks operating in the shadow of a US government bailout.
The government had held off selling its share stake in the firm until now, no doubt dissuaded by its low market value.
The bank last week said it had returned to profit after two years spent largely in the red, posting a profit of 4.4 billion dollars in the first quarter of this year.
Since then it has risen almost 40 cents a share, a potential earning of around 300 million dollars for the Treasury.
Date created : 2010-04-27