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  • July 2009 (Revised June 2015)
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Citigroup's Exchange Offer

By: Robin Greenwood and James Quinn
  • Format:Print
  • | Language:English
  • | Pages:14
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Abstract

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.

Keywords

Financial Crisis; Capital Markets; Banks and Banking; Stocks; Price; Globalized Markets and Industries; Financial Services Industry

Citation

Greenwood, Robin, and James Quinn. "Citigroup's Exchange Offer." Harvard Business School Case 210-009, July 2009. (Revised June 2015.)
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About The Author

Robin Greenwood

Finance
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Related Work

    • July 2009 (Revised June 2015)
    • Faculty Research

    Citigroup's Exchange Offer

    By: Robin Greenwood and James Quinn
Related Work
  • Citigroup's Exchange Offer By: Robin Greenwood and James Quinn
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