The c, citibank news is just plain incredibly horrible.
<<(C: 3.08, +0.57, +22.7%) said Thursday that it has filed with regulators for approval of its plan to issue common stock in exchange for convertible and non-convertible preferred and trust preferred securities. Citi first announced the plan in late February, and said it hopes it will convert about $52.5 billion of preferred shares into common shares. The bank said it hopes to launch the exchange offer in early April, subject to regulatory approval. Citi also said it is asking for approval to execute a reverse stock split of its common stock.>>
1. Reverse splits are basically tombstones for stocks. It means they don't see the price going up and it will probably crater.
2. This common for preferred and trust preferred shares for 52 billion USD is an admission of Zombiehood. The only reason for the preferred holders to convert is because the preferreds are in danger of being wiped out in bankruptcy. Any holders will demand a nice conversion at par which is probably 90% above the current prices. They will then dump the stock and run like hell, and equity will crater. That is why they need to reverse split the common.
Citibank is essentially bankrupt and running on smoke and mirrors. The feds own most of it after converting their TARP shares. So after this monumental bad news, the stock was up 24 cents last I checked. Makes no sense.
IMO, this market is running on air. Bad news is all of the suddent good news. Companies like AIG and C are holding up because people assume the government will prop up the zombies no matter what. While this is true, the zombies are still...zombies. While I rarely agree with Denninger who seems to have been born depressed, his comments on the FOMC and fed actions have a serious point.
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