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Citi shares drop as sale 'halted' Citi shares drop as sale halted
(about 6 hours later)
Shares in Citigroup fell 9% as the US Treasury has backed out of plans to sell part of its stake in the troubled US bank. Shares in Citigroup have fallen 7.3% after the US Treasury said it was delaying plans to sell part of its stake in the troubled bank.
Citigroup said on Wednesday that it would sell shares at a steep discount to raise the cash it needs to repay $20bn of the bail-out it received. Citigroup said on Wednesday it would sell shares at a steep discount to raise the cash it needs to repay $20bn (£12.4bn) of the bail-out it received.
The Treasury reconsidered selling $5bn of shares after the price was set below what it paid. The Treasury, which owns almost 34% of Citigroup, said the $3.15 a share price was too low for it to participate.
That would mean the US would have taken a politically unpalatable loss. This is because it is less than the $3.25 the government paid per share.
Citigroup - which is 34% owned by the government - is the last Wall Street bank to leave the US bail-out programme instituted during the financial crisis.
The US Treasury was planning to sell a $5bn stake in the bank during the share sale.The US Treasury was planning to sell a $5bn stake in the bank during the share sale.
But Citigroup's $17bn of new shares met with a tepid reception when it started offering them to institutional investors on Tuesday. The government now plans to sell its entire stake, about 7.7 billion shares, over the nex 12 months.
"The US Treasury decided not to sell any of its shares in connection with Citi's sale of common stock," the bank said after it priced its share sale. Shares in Citigroup have fallen every day this week.
The government now plans to sell its entire stake, about 7.7 billion shares, over the next six to 12 months, according to US media reports. "The fact the government did not sell their stake was a sign there was really limited market appetite," said Nick Kalivas of MF Global in Chicago.
The bank announced on Wednesday it would sell stock at $3.15 per share, below the $3.25 price that the government paid for its stake. "Now you have this government share sale hanging over the market."
Citigroup shares fell 9% to $3.15 in opening trade.
Shares in the US bank have fallen every day this week.