Moore Capital Management LP and Maverick Capital Management LP bought Citigroup Inc. shares as the bank’s board grew dissatisfied with Chief Executive Officer Vikram Pandit’s performance, eventually ousting him.
Moore Capital, the hedge fund run by billionaire Louis Moore Bacon, bought 5.31 million shares in the quarter ended Sept. 30, making the lender its biggest U.S. publicly listed holding, according to a U.S. Securities and Exchange Commission filing yesterday. Maverick, the $10 billion firm run by Lee Ainslie, purchased 2.72 million shares of the New York-based bank, according to a filing.
The filings show investors placed bets on Citigroup even as the board’s confidence in Pandit was waning. The firm said Oct. 16 that Michael Corbat replaced Pandit and will review the bank’s businesses before making more management changes.
“There are a lot of pieces to this puzzle that can create value if you have the right management,” said William B. Smith, CEO of hedge fund Smith Asset Management, which owns shares of the bank. “Citigroup is a bloated bureaucracy; radical things still need to get done.”
Citigroup advanced 1.5 percent to $35.55 at 10:34 a.m. in New York. The shares have fallen 3.2 percent since Pandit’s departure and plunged 89 percent during his five years as CEO. Shannon Bell, a Citigroup spokeswoman, declined to comment on the stock-ownership changes.
Corbat, 52, takes over a strategy of cutting jobs and disposing of unwanted assets, including a minority stake in Smith Barney. He’ll seek to return more capital to shareholders after the Federal Reserve blocked the bank’s proposal in March, and sustain a turnaround at a company that incurred almost $30 billion in losses during the depths of the financial crisis.
The board ousted Pandit after concluding his handling of operations caused setbacks with regulators and cost credibility with investors, a person with knowledge of the discussions said at the time of his departure. Directors had contemplated replacing Pandit for months as they became increasingly frustrated with his performance, the person said.
Citigroup posted third-quarter profit of $468 million, or 15 cents a share, after analysts surveyed by Bloomberg predicted a loss. The stock surged 19 percent in the period, the best performance in the KBW Bank Index of 24 U.S. lenders.
Maverick increased its Citigroup stake to 5.01 million shares in the third quarter as Moore Capital, which oversees $13.5 billion in assets, acquired its entire holding during the period. Boston-based Adage Capital Management LP purchased 3.62 million shares, and Glenview Capital Management LLC bought 2.71 million, according to filings yesterday from those firms.
The four hedge funds combined added 14.4 million Citigroup shares, valued at $470 million as of Sept. 30 and representing about 0.5 percent of the company’s shares outstanding.
Other funds that added to their stakes include David Tepper’s Appaloosa Management LP, which bought almost 929,000 Citigroup shares and Soros Fund Management LLC, led by billionaire George Soros, which added 1.52 million. Citigroup is Appaloosa’s third-largest holding by market value after Powershares QQQ Trust, which tracks the performance of the Nasdaq 100 Index, and Cupertino, California-based Apple Inc., according to a filing.
Bill Ackman’s Pershing Square Capital Management LP exited its Citigroup position by selling 1.1 million shares.
Hedge funds purchased shares of other big U.S. banks during the quarter, including JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp.
Odey Asset Management LLP, the London-based hedge fund founded by Crispin Odey, bought 621,000 shares of JPMorgan, making the New York-based bank its largest holding, according to a filing. Odey counted Citigroup as its third-largest holding even after selling 813,000 shares.
Citigroup was Moore Capital’s largest investment at the end of September and JPMorgan was its second-biggest. The hedge fund also bought a stake in San Francisco-based Wells Fargo by purchasing 1.97 million shares and added 5.15 million shares to its holding in Charlotte, North Carolina-based Bank of America.
“A lot of it is the pure financial-sector momentum trade,” Smith said. For large hedge funds, “the nice thing about the banks, at least the big boys, is there is liquidity. They can get in and get out pretty easily,” he said.