Looking at Citibank Another Way

I read a lot of negative comments on Citigroup (C), many focused on the massive dilution. Anyone with $2000 can open a margin account and sell Citigroup short. Back in the summer when the preferred exchange offer was taking place, it was difficult to sell Citigroup short because you couldn't borrow. Now it is easy to borrow the stock, so if you are negative, go for it.

At year end 2006, Citi had 5 billion shares outstanding and was trading at $56, a market value of $280 billion. After the preferred conversion this summer and last week's offering, Citi has 30 billion shares outstanding and trades for $3.34; a market value of $100 billion. Friday's close is 36% of the year end 2006 market value.

Let's look at this another way. Assume that Citi still had the same 5 billion shares outstanding. If the stock was trading at 36% of the year end 2006 price, it would be at $20. Certainly, there have been some problems, but the price would seem to reflect them.

It seems to me that Citi has a lot of potential. The company is the only US based bank that is truly global. Citi doesn't have the same degree of domestic mortgage issues as its competitors.

I bought the stock on the offering and think that it could double in 2010.

If you think it is going down, short it.

Disclosure: Long C

Source: Looking at Citibank Another Way