Citigroup Warrants Fall to Record, Down 87% From Auction

Warrants tied to Citigroup Inc. (C)’s bailout fell to a record low, down 87 percent from the price at which they were sold by the U.S. Treasury Department in a 2011 auction.

Citigroup B warrants dropped 6.8 percent to 3.45 cents at 2:15 p.m. in New York. The contracts allow investors to buy Citigroup stock at $178.50 by Oct. 28, 2018. The shares haven’t traded that high since 2008, adjusted for a reverse split in 2011. The New York-based lender traded at $47.92 and has slumped about 8 percent this year.

“The odds of it getting to $178 are fairly slim,” Chris Whalen, a bank analyst and head of research at Kroll Bond Rating Agency, said in an interview. “Citi and all the big banks face some daunting growth prospects.”

Citigroup, the third-largest U.S. lender, is grappling with setbacks that include a slump in client trading and a $400 million loan fraud at its Mexican unit. The Federal Reserve in March rejected Chief Executive Officer Michael Corbat’s plan for a dividend increase and share buybacks as the company failed the central bank’s stress test.

The Treasury obtained warrants in banks so that taxpayers could profit from recoveries at companies that were bolstered by the government’s Troubled Asset Relief Program. The U.S. auctioned the B warrants for 26 cents a piece in January 2011. Citigroup A warrants, which allow investors to buy the stock for $106.10 by January 2019, were auctioned at $1.01 a piece and now trade for 64 cents. The combined sales raised about $312 million.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Dan Kraut, Rick Green

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