Eton Park Capital Management LP and Viking Global Investors LP were among at least five hedge funds that exited their Citigroup Inc. (C) stakes in the first quarter as investors shied away from U.S. banks facing revenue declines.
Eton Park, the hedge fund run by Eric Mindich, sold 80.5 million shares in the quarter and Viking, co-founded by Andreas Halvorsen, liquidated its holding of 151 million shares, according to filings yesterday with the U.S. Securities and Exchange Commission. The stakes were valued at $381 million and $714 million, respectively, at the end of last year.
The firms eliminated their holdings before Citigroup imposed a 1-for-10 reverse stock split earlier this month. Chief Executive Officer Vikram Pandit, 54, announced the split in March as a way to make the bank’s shares more attractive to investors. Citigroup shares peaked at $51.30 a share on Jan. 14 before tumbling 14 percent over the rest of the quarter amid concerns over financial firms’ revenues and market uncertainty due to the tsunami in Japan and unrest in the Middle East.
“Citi peaked in mid-January and it’s been downhill ever since,” said Gary Townsend, president of Hill-Townsend LLC in Chevy Chase, Maryland, who manages about $1.4 million of Citigroup shares. “Revenues seem to have been a particular concern in the first-quarter numbers. While most of the financials outperformed, there was dissatisfaction.”
Citigroup fell 6.6 percent in the first quarter after surging 43 percent last year, compared with a 22 percent gain for the 24-company KBW Bank Index. (BKX) Citigroup rose 35 cents to $41.54 at 9:45 a.m. in New York Stock Exchange composite trading.
Tudor Investment Corp.
Eton Park and Viking were joined by Tudor Investment Corp., AQR Capital Management LLC and Daniel Loeb’s Third Point LLC in cutting their investments in the New York-based lender.
Tudor, the $11.5 billion hedge fund founded by Paul Tudor Jones and based in Greenwich, Connecticut, sold 3.94 million shares in the quarter, according to a regulatory filing. AQR, the fund run by Clifford Asness, disposed of 11.3 million shares, while Third Point sold all of its 7 million, according to a filing.
Other investors pared their Citigroup holdings without exiting their investments completely. Moore Capital Management LP, the $15 billion hedge fund run by Louis Moore Bacon, sold 35.2 million shares in the first quarter, while Appaloosa Management LP shed 40.9 million shares, filings show. Lone Pine Capital LLC, the hedge fund run by Stephen F. Mandel Jr., disposed of 51.7 million shares.
Dividend to Resume
Citigroup said March 21 that it would resume paying a dividend of 1 cent a share in the second quarter after the reverse stock split. The first day of trading after the split was May 9. Jon Diat, a bank spokesman, declined to comment.
First-quarter profit dropped 32 percent to $3 billion from $4.43 billion in the same period last year, Citigroup said in an April 18 statement. Revenue declined 22 percent to $19.7 billion, the company said. Net revenue at the six largest U.S. lenders, including Citigroup, fell 13.3 percent in the first quarter from a year earlier, according to Bloomberg data.
Also in the first quarter, Eton Park purchased 107.7 million Citigroup warrants expiring in January 2019 that convey the right to buy common stock at $106.10, and another 34.5 million warrants expiring October 2018 with a strike price of $178.50. The warrants were given to taxpayers as part of the bank’s $45 billion U.S. bailout, and auctioned off by the government in January.
Investors Increase Stakes
Other investors, including billionaire George Soros, increased their Citigroup stakes. Soros Fund Management LLC bought 18.7 million shares, Highbridge Capital Management LLC added 21.9 million and Bruce Berkowitz’s Fairholme Capital Management LLC purchased 21.3 million, filings show.
Kingdon Capital Management LLC, the hedge fund founded by Mark Kingdon, took an initial stake of 17.5 million shares valued at $77.4 million as of March 31.
“The outlook continues to be pretty good for Citi, partly because of their international exposures, continuing credit improvement and rationalization of structure,” according to Townsend. “Earnings continue to improve and actually accelerate.”
Separately, Wellington Management Co. added to its holdings of New York-based JPMorgan Chase & Co. (JPM) in the first quarter, and sold 5.5 million shares of Goldman Sachs Group Inc. (GS), according to a regulatory filing. Wellington’s stake of 89.7 million shares in JPMorgan was valued at $4.13 billion as of March 31.
Money managers overseeing more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.
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