I thought C would tank hard once the catalyst of earnings release was gone and the government resumed selling. However, since last week, C's price has shown some resilience. That makes me wonder could it be some sort of share buyback under way?
Everybody knows a share buyback will almost always increase PPS significantly. So, why would a company announce a share buyback before it actually did it?
Citi is raising cash hand over fist. It was curious why they were issuing bonds recently. I just hope they deploy that cash that they raised constructively.
A) buy back shares at least up to tangible book value. It's literally the financial equivalent of minting money.
B) buy back up to book value. Not as attractive of a proposition, but still increases value for its shareholders.
C) lend.. Lend.. And then lend some more. Let's get this recovery going already.
Ps.- Whitney has not been very good in her projections since the bubble. She is right on some accounts, but if you invested based on her advice, you would have been poorer. That said, the world is changing rapidly, old notions of fair value is changing. Things that worked in the past might not hold anymore.
Now, it looks like a perfect time for Citi to buy back shares.
Reason #1: Depressed and under-valued PPS
Reason #2: The company is getting leaner, which translates to fewer non-cash assets and more cash accumulation on the balance sheet. When companies have excess cash in hand and don't have strong needs for capital spending, what do they do? They repurchase shares.
Reason #3: If the recovery is slow but a double-dip recession is unlikely, there is no guarantee that reinvesting retained earnings will create profit. So why wouldn't they buy back shares to increase EPS?
i don't believe C (as a corp) has authorization to buy back shrs at this time. i don't have that 'official'; it's something i recall. i recall some C exec stating they couldn't; in addition...they can't (again i recall this) buy their shrs back directly from the TSY.
Has anyone noticed that over the last few days C has been frozen at the same quote for hours? No matter how many shares are traded the price doesn't move? Friday it was 4.09. Today it's 4.11. What does that indicate? Govt selling at a fixed price? C buying back at a fixed price? Seems a bit strange.
I don't think it's anything like that. Simple supply and demand. With a ton of volume the curve is a lot smoother than stocks with less outstanding shares (and hence less daily trading volume). Look at a chart with less shares outstanding (GS for example) and their chart will be a lot bumpier, with wild swings, than a comparable daily chart for Citi.
People love to theorize that Citi is secretly buying back shares, but if they were, SEC & FASB requires they disclose this in their financials. Evidence of a secret share buyback just does not show up.
I highly doubt Citi is buying back any large number of shares. Last quarter it acquired $600 million in treasury stock. This was most likely done as compensation for key executives.
The fact that the stock has not tanked once USG resumed selling is a good sign. There is enough investor demand out there to soak up the excess stock sales without dramatically driving the price down.
If CEO and CFO are strongly believe that Citi could break that $5 barrier, then they can be legally creative by leveraging low interest rate (near 0% for big banks) to accummulate cash to buy back stocks at the low price.
1) Can't beat 0% interest from the Fed, and certainly it will boost stock valuation by reducing the number of shares floating out there.
2) Learn from Ford CEO, gather cash when you can to boost valuation, and save for rainy days.
3) The fact that Citi is beating quarterly profit expectation, and it is a leaner international company would increase long term investments return.
As an investor, it is a great value. Day traders will make money, but that's like gambling. You win some and lose some!