On Friday, December 3, 2010, right after the market closed, US Treasury announced that it would sell all its holding of Citibank common shares. In the after hour trading, the Citibank share price was plunged as much as 10% with very heavy volumes, in fear of share bleeding due to its usual slow selling. However, in a surprising move detailed Friday night, the US Treasury not only was indeed to sell all of the Citibank holdings, but also actually had sold all of these shares at once in a very large private “public offerings”, with an amazing price of $4.35. That was less than 3% discount, compared to Friday’s closing price of $4.45. Yes, US sold all of the 2.4 billion shares for $10.5 billion, a hefty $12 billion profit to US Treasury for its rescue investment in the Citibank less than two years ago.
Golden Panda Investment, GPI, has been in a position to promote the immediate selling of US holdings of all the Citibank common shares for several months, see the article posted in October 5, 2010.
http://goldenpandainvestment.blogspot.com/2010/10/answer-to-financial-led-economy-turn.html
In the arguments, GPI had questioned the true intention of holding and slow selling of the US Treasury on Citibank. The US Treasury was to achieve its punishment of Citi, to impose the control over the banks and vandalize American’s anger towards the greedy bankers. However, the tax payers did not make the money they supposed to make because of the significant drop in share price. The Citi and the entire financial industry got the punishment and had to operate under extensive stress. The banks had no choice but to protest themselves by restricting business lending. When there is lack of funds for lending, businesses are hard to grow or even to survive. As a result, the entire US economy suffers. The only beneficiaries from all these actions are government officials, they have firmly maintained their supreme grasp to control and manipulate the banks and other financial institutions.
http://goldenpandainvestment.blogspot.com/2010/10/answer-to-financial-led-economy-turn.html
In the arguments, GPI had questioned the true intention of holding and slow selling of the US Treasury on Citibank. The US Treasury was to achieve its punishment of Citi, to impose the control over the banks and vandalize American’s anger towards the greedy bankers. However, the tax payers did not make the money they supposed to make because of the significant drop in share price. The Citi and the entire financial industry got the punishment and had to operate under extensive stress. The banks had no choice but to protest themselves by restricting business lending. When there is lack of funds for lending, businesses are hard to grow or even to survive. As a result, the entire US economy suffers. The only beneficiaries from all these actions are government officials, they have firmly maintained their supreme grasp to control and manipulate the banks and other financial institutions.
GPI understood that banking and investment alone cannot turn around this poor economy. However, it is definitely impossible to thrive the economy, if the banks and financial institutions are depressed under water to nervously test the deep bottom. The new Financial Bill and the regulations have drawn the no-crossing lines for them, but the Obama government is still holding one of their legs by holding Citibank shares.
GPI has since repeatedly called US Treasury to sell all the remaining Citi holdings immediately at once, because Citibank’s business is fundamentally health and profitable. It expands rapidly in the emerging Asia, Latin America, Africa markets. Citibank certainly wants to buy some shares back from government. Sovereign funds and big investment funds are eager to acquire Citi share as well. They can purchase the shares slowly in the open market. Why not complete this process now at one time? Once the government holding is depleted, the huge burden and pressure on top of Citibank and other financial institutions will be removed. They will then be motivated to accelerate their business lending and investment activities. This will jump up the entire US economy. Look for a win-win situation, nothing seems better and more effective. Banks get the relief, tax payers get more money quickly, the US economy will get a big boost, and the government takes all the credit.
GPI has asked a tall question then, i.e., does Obama truly wants to jump start the US economy? GPI believed that C is the real answer.
GPI is very pleased to see that the US Treasury finally answered the call. The detail arrangement of the share transactions has not made public. But whoever made this great investment at this moment, whether they are Chinese sovereign funds, oil rich natural funds or big hedge funds, their immediate and long term profits on Citibank will be enormous.
More importantly, by promoting this immediate transaction, US government removed the most stressful pressure on the entire financial industry. It also signals a turning point, away from its hostile attitude toward the financials. The industry and the market have indeed responded very positively on Obama’s encouraging move, Citibank’s share went up more the 7% for the week and the deeply depressed Bank of America went up more than 8%. Shares of almost all the major financials went up as well.
Obama has now answered this important call.
It is up to the financial industry to turn around and jump up the US economy in the coming months.
Enjoy the wild ride!
