Citi's Twofer: Stock Split and Expensive Decor

We've got a new recipient for the John Thain Toilet Award!

Forget your AIG bonus outrage. Today, Citigroup (C) shows that whole "chastened investment banker" meme is basically a lie. According to Bloomberg, Citi gets $45 billion in taxpayer bailout money and decides its chief executive and top lieutenants should spend $10 million on new offices. Crass or stupid? You decide.

As Bob O'Brien puts it at Barron's:

The only takeaway is that these executives don’t seem to understand how unseemly this conduct looks in an era where the taxpayers who are keeping them afloat are too afraid to buy new floormats for their cars because it seems like a discretionary purchase - a no-no for anybody worried they or a family member could be unemployed at any time.

That's not the worst of it. Citi's other big announcement is its plan to further punish common shareholders (because $1 a share earlier this year wasn't bad enough). Citi's deal with the government to shift preferred shares into common stock (press release is here) is only going to dilute you again. As for that reverse stock split? Well, the price goes higher, but the value of your stake says the same. Reverse splits are a refuge for companies who simply don't like where their stock is trading.

Vikram Pandit may be upbeat about his bank, which made money in January and February, and he says the office renovations will save more money than the $10 million cost. Maybe, but if bank CEOs can't see which way the wind is blowing when it comes to conspicuous spending at a time when the company is diluting common shareholders to boost capital, those same shareholders -- including taxpayers, who will own about 36 percent of the bank after all is said and done -- shouldn't be as optimistic.

Comments

[Mad Hedge Fund Trader]

This had to come. I have a question, Mr. Market. If General Electric (GE) got down to $5, Bank of America (BAC) to $2, and Citigroup (C) to $1, where were the share buybacks? Are these companies too broke to buy their own shares, or do they think a few bucks over zero is too much to pay? I’m not sure I like either answer, or even my own question.

2009 Mar 19 02:13 PM

[Guido Sacconi]

Kirk. Assumign Citibank is right and spending U$10.000.000 in new offices will at the end generate savings, unless savings are significant, they should understand its not only what you, do but really about how others perceive what you do and the possible consequences that might have. On a different angle and looking 3 or 5 years ahead. Would it be a good idea to buy Citibank stock now?

2009 Mar 19 11:34 PM

[Just Beginning]

I'm not the most seasoned or informed investor, but I thought that many companies receiving bailout money (might be specifically TARP funds) were not able to use that money for share repurchase programs. It's a shame, but it's a fact.

2009 Mar 20 11:38 AM

[optionsgirl]

Why is no one outraged that the SEC gave permission for this reverse stock split? They waived the rules- the investors don't get to vote on it.

Why don't we hear more outrage that the SEC is continuing to permit companies that are down to $1 a share to continue to be listed on the NASDAQ? They should be delisted, and pronto.

Why was Timothy Geitner permitted to pay off his tax debt with no penalties or repercussions? I don't want him representing my interests in any way.

There is no one talk complain to about what is happening. The only thing we can do is vote everyone out of office, starting with Dodd ( who wrote in the loopholes for the AIG bonuses and then denied it,
Frank, et al. In the next election, don't forget to vote those bums out of office.

2009 Mar 20 12:08 PM