Sunday, September 26, 2010

Serious 2: Now CitiGroup

Last Thursday, I reported that the Treasury is cutting back significantly on the number of shares of GM it will sell in its planned offering because demand was weak.

Now comes word that the Treasury is missing targets on its sale of CitiGroup stock. FT reports:
The US government is in danger of missing its deadline of divesting all of its Citigroup shares by the year-end after a fall in stock market trading volumes prompted authorities to slow down sales in July and August...

The government only seeks to sell shares equivalent to a small percentage of the overall trading volume in Citi to avoid depressing the price.

By the end of August, less than half of the government’s 7.7bn shares in Citi had been sold, with the average number of shares sold per day falling sharply, the latest official data show.
FT continues:
The lull could prompt the US Treasury, which has a stake of about 17 per cent in Citi, to consider a share offering instead of selling the stock in small quantities in the market, according to bankers and analysts.
Good luck with that, if the volume isn't there, the price the Treasury will get for its shares through an offerring will likely be a major discount from the current price.

The lack of demand for both these deals is a major sign of how limited demand is for stocks right now and how vulnerable the market is.. Sometime between now and the end of the year, there is likely to be a major break downward in the market

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