The U.S. Department of the Treasury announced Monday that it is ready sell off its 27 percent ownership stake in Citigroup.
The Wall Street bank was one of the biggest bailout recipients among financial institutions, and the government is expected to turn a pretty penny for its efforts to keep Citi afloat – a net of more than $8 billion, according to preliminary estimates.
Treasury said it plans to fully dispose of its 7.7 billion shares of Citigroup common stock over the course of 2010. The shares were acquired under a June 2009 agreement between Treasury and Citi, which allowed the bank to exchange the preferred stock the government received for its bailout into common shares and made taxpayers the company’s largest common shareholder.
The Treasury’s $25 billion original investment in Citi now carries a market value of $33.2 billion. According to Thomson Reuters, it would be one of the biggest stock deals in history, bested only by the 1987 stock offering of Japan’s Nippon Telegraph and Telephone, which raised $36.8 billion.
In a recent article, the Washington Post said leading financial firms, such as JPMorgan Chase and Goldman Sachs were vying to be chosen as the deal’s underwriters, even offering their services for next to nothing just to get a piece of the action. But the Treasury said Monday that it has hired Morgan Stanley to serve as its capital markets advisor in connection with its Citigroup position.
Treasury officials say they intend to sell off the Citigroup common shares “through various means in an orderly and measured fashion,” and noted that the timing of the disposition would be dependent on market factors.
The planned sale does not affect Treasury’s holdings of Citigroup trust preferred securities or warrants for its common stock, which were acquired through bailout transactions. But when the deal does go through, it will represent a major step for Citigroup in severing its ties to the federal government.
Citigroup shares, which have gained 26 percent since the beginning of the year, were among the most-heavily traded on Monday following the Treasury’s announcement, Forbes reported. The financial news service said Citigroup stock lost 3 percent in regular trading and was headed lower shortly after the closing bell.
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