Abu Dhabi Buys Citigroup Some Time
November 27th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
HAHAHA Priceless!
Instead of Helicopter Ben on the banner, I need some guys on magic carpets, flinging cash over lower Manhattan.
Anyone thinking about playing the put options lotto on some of the most screwed financials this morning? Deep out of the money December put options on Citigroup (C), JP Morgan (JPM), and HSBC (HBC). And/or puts on the Financial Select Sector SPDR Fund (XLF) will do the trick.
Remember, it’s the put options lotto. Gamble responsibly.
Via: Bloomberg:
Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.
Citigroup rose 3.7 percent in early trading today following acting Chief Executive Officer Win Bischoff’s statement late yesterday that funds from the state-owned Abu Dhabi Investment Authority will help “strengthen our capital base.”
Abu Dhabi will buy securities that convert to stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company’s need for cash. Fourth-quarter profit will be reduced by as much as $7 billion because of losses from subprime mortgages, which led to the departure of CEO Charles O. “Chuck” Prince III and a 46 percent slump in its stock this year.
“Clearly, Citi has a problem with capital adequacy after the subprime crisis,” said Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, Abu Dhabi’s biggest bank by market value. “ADIA has seen an opportunity to get cheaply into a blue-chip stock.”
With the purchase of a 4.9 percent stake, Abu Dhabi, the largest emirate in the United Arab Emirates and its capital, would rank as Citigroup’s largest shareholder ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.
A put option is a bet something’s going to freaking tank big-time, IIRC.
/cue “I Dream of Jeannie” theme with a visual of Jeannie crossing her arms and blinking a stack of gold-bricks into existence for Citigroup
A bit sobering because the one credit card I allow myself to have (and when you’re a working grunt at the grocery store like me, you really do need to have one, as detestable as you might think they are) is a Citibank card.
“A put option is a bet something’s going to freaking tank big-time”
Not necessarily big time. It depends how far your strike price is from the price of the stock. See terms like:
in the money
near the money
out of the money
deep out of the money
deep in the money