(GuruFocus, December 15, 2009) In the third quarter of 2009, John Paulson built a large position in Citigroup (C, Financial). GuruFocus Data shows he initiated a 300 million share position during the quarter. For the quarter, the stock was traded between $2.59 and $5.23, with a numerical average of $3.91.
We do not have the exact average cost information on Paulson’s exact cost. Citigroup stock has an exceedingly large volume these days, with a three-month average volume of 460 million shares. Paulson’s holding is less than one day’s trading volume, making estimating his cost in the stock impossible.
If the 3Q09 average price of Citigroup stock was close to his average cost, John Paulson will be better served to wait until now.
On Monday, The bank announced that it will sell $17 billion of common stock, with a so- called over-allotment option of $2.55 billion, and $3.5 billion of "tangible equity units." In the meantime, The U.S. Treasury will sell as much as $5 billion of common stock it holds, with plans to unload the rest of its stake during the next six to 12 months.
Citigroup closed at $3.51, down 13 cents per share today, with more than 934 million share changed hands.
Citigroup wants to pay back the fund it received from the government as part of the TARP program, even though doing so does not break the company away from the yoke the US government placed on it. As Richard Bove of of Rochdale Securities Financial points out, paying back the TARP money by issuing common stocks does not improve the capital position, does not increase the value of the book value, it only helps company management paying themselves more money.
That said, even Dick Bove admit that holding Citigroup may make good money in five years. Short term, it will be very volatile.
One could argue that if John Paulson waited, he could have got better prices. On the other hand, history shows that John Paulson can wait for a couple years for his investment thesis to manifest itself. Perhaps Citigroup Inc. stock is one of them?
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and John Paulson for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
We do not have the exact average cost information on Paulson’s exact cost. Citigroup stock has an exceedingly large volume these days, with a three-month average volume of 460 million shares. Paulson’s holding is less than one day’s trading volume, making estimating his cost in the stock impossible.
If the 3Q09 average price of Citigroup stock was close to his average cost, John Paulson will be better served to wait until now.
On Monday, The bank announced that it will sell $17 billion of common stock, with a so- called over-allotment option of $2.55 billion, and $3.5 billion of "tangible equity units." In the meantime, The U.S. Treasury will sell as much as $5 billion of common stock it holds, with plans to unload the rest of its stake during the next six to 12 months.
Citigroup closed at $3.51, down 13 cents per share today, with more than 934 million share changed hands.
Citigroup wants to pay back the fund it received from the government as part of the TARP program, even though doing so does not break the company away from the yoke the US government placed on it. As Richard Bove of of Rochdale Securities Financial points out, paying back the TARP money by issuing common stocks does not improve the capital position, does not increase the value of the book value, it only helps company management paying themselves more money.
That said, even Dick Bove admit that holding Citigroup may make good money in five years. Short term, it will be very volatile.
One could argue that if John Paulson waited, he could have got better prices. On the other hand, history shows that John Paulson can wait for a couple years for his investment thesis to manifest itself. Perhaps Citigroup Inc. stock is one of them?
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and John Paulson for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
