Citi shares tumble after sale

NEW YORK: Shareholders and analysts have reacted angrily to Citigroup's botched US$20.5 billion ($28.8 billion) fundraising, in which poor demand from investors drove the banking giant's share price sharply lower and left the US Government unable to sell any of its stake.

Citigroup launched the fundraising in order to pay back US$20 billion of the US$45 billion it received from two taxpayer bailouts last year, but was able to find enough buyers only by offering new shares at the discounted price of US$3.15.

That was far below the level it had expected and had led the US Treasury to hope for.

Amid the recriminations yesterday, traders said Citigroup had misread the markets and mis-timed its efforts.

Analysts said that foreign investors remained concerned about Citigroup's riskiest businesses and assets, and they scaled back earnings-per-share forecasts to account for the much higher number of shares that will now be in circulation.

The bank itself defended the outcome, pointing out it had completed the biggest equity fundraising in US history.

The Government will still have a 26 per cent stake, giving it an ongoing say in how the company is run, and will gradually sell the stock before the end of next year.

- INDEPENDENT