Citigroup's Exchange Offer
Synopsis
Citigroup faced considerable distress in early 2009. In late 2008, the bank had accepted $45 billion in preferred equity from the United States government via the Troubled Assets Relief Program (TARP). Yet, the stock had continued to slide in early 2009. In late February, the company announced that it would convert as much as $50 billion of preferred stock into common stock, at $3.25 per share. The case asks students to evaluate the pricing of preferred stock relative to common stock at this time. As the case takes place during a period of considerable uncertainty in global capital markets, and conventional sources of arbitrage capital have been depleted, the apparent mispricing may not be as attractive as it initially seems. In the B and C cases, students must decide whether their view of the appropriate pricing changes, when the apparent mispricing worsens. A final additional teaching point relates to the formation of a synthetic short position using the options markets.
- कॉपीराईट:
- 2009 HBS
Book Details
- Book Quality:
- ISBN-13:
- Publisher:
- Harvard Business Publishing
- Date of Addition:
- 2016-08-03T00:51:24Z
- भाषा:
- English
- श्रेणी:
- Usage Restrictions:
- This is a copyrighted book.