Setting record straight on Citi investment

last SG · 2009-05-09T16:58:49+00:00

Look don't take my word for it. Read the Reuters article below for example. Do your own research. Just do it intelligently and fairly, instead of having an a...

deepak.c SG

Coincidentally, maybe you can explain why billions of dollars of the country's money can be used to gamble on these risky investments. But trying to get a small portion of it to benefit singaporeans directly through good workable assistance programs or to help the poor and unemployed is like trying to squeeze blood from a rock.

You can squeeze blood out of a rock, serious, it helps if your rock is serrated.

jojobeach SG

Charlize, you raise a fair point. As I have mentioned, I do sympathise with the thought that GIC's investment portfolio should be a lot more transparent. At the very least it would cut down on some of the crazy ignorant posts about how much this or that investment is losing money. On the other hand, the Temasek portfolio and returns are relatively very transparent. You can find their annual financial statements online. So it's not a totally empty glass problem. Perhaps a glass one-third or half-full. But yes, things could be much improved on this count.

On your point of grouses "on the ground." I will say I understand, but it is also something I do not share partly because of my situation and partly because of what I have seen globally.

I have lived in 3 continents. When I say lived, I mean staying put in a country for more than 12 months straight. I also have a relatively good life, some might even say I'm "rich" though I don't feel rich for sure. I have a good and interesting career that has allowed me to travel and live around the world. Right now my apartment is in the middle of a major global city, just across the street from a park. Spring is out where I live. The sun is shining, the birds are chirping and flowers are sprouting. So unlike maybe other people I'm not in a constantly angry state of mind, thinking that the world owes me a living. Incidentally, I wasn't born rich but have come where I have come through intelligence and ambition.

What am I trying to say? Anyone who has lived in NY, London, HK or any major global city finds the same sentiments among the, let's just say, "lower middle classes and below." People compain about immigrants taking their jobs, about an unresponsive government, about their low wages, about the inadequacy of public service, about the "elites" perpetuating themselves etc etc. At least in Singapore, you don't complain that much about taxes as they are relatively low for a developed country, but I admit there are other different grouses. People in Singapore also take for granted the superior public amenities they enjoy. For example, good luck if you have no health insurance in the US! Have you ever tried waiting for outpatient treatment at public NHS clinics in the UK?

So I'm sorry to say that what people "on the ground" complain about in Singapore is, in my perspective, nothing really special. I have seen it all overseas. It's largely a function of the world we live in nowadays. Economic globalisation implies a lot more immigration and greater social divide. This is true around the world, and not just Singapore.

Oh Pfffttt ! What are you.. another bubble boy ?

Sure.. ya don't have to give a shit about what "people on the ground complain about... because you are rich and worldly.. my foot.

Another of the " get out of my uncaring elitist face" idiot.

Ya know.. people here can see through your narcissistic bullcrap.

" Oh.. I am so rich".

"Oh.. I live in a BIG city."

"Oh...I have not seen poor people on my streets .. EVAR..(gay)"

"Oh.. get over it.. that's just life you low class crapolar, there's a trash can over there."

Chew Bakar SG

Perhaps you can factor in the exchange rates. At the conversion time it is USD1.00 = SGD1.53, currently at SGD1.46. That would have effective cancelled the so call "profits". In business, the bottomline is show me your cash.

charlize SG

Singaporeans will never see the cash.

Whether they make $1 or $1 trillion.

Really.

Daddy!! SG

citi's market cap is around US$ 22 billion today. GIC owns about 11% of Citi which is about US$ 2.3 billion.

Camb76 SG

The market cap you see only captures the value of the outstanding common equity at present. Once the conversion of the preferred stock into common equity has been finalised, the market cap will jump. The relevant part of the press release by Citi on this matter is below (I have pasted the full press release in an earlier thread):

"This transaction could increase the TCE (Tangible Common Equity) of the company from the fourth quarter level of $29.7 billion to as much as $81 billion, which assumes the exchange of $27.5 billion of preferred securities, the maximum eligible under this transaction."

So the deal to convert at US$3.25 a share has been formally announced, but it has not been affected yet. There is usually a lag of a few months between the announcement and the implementation in these sort of deals. Lots of legal matters to finalise and documents to file with the relevant authorities. Hence, the market cap you cite does not capture the conversion yet.

AndrewPKYap SG

Merrill Lynch aka known as Bank of America... bought at ~26

BAC 12.94 -1.23

-8.68%

now at ~ 10

Don't forget opportunity costs and interests lost...

Curse the dishonorable despot and cronies for taking massive amounts of public money... for their own pockets and gambling with it.

787180 SG

Don’t think of the short term loss lah..over the horizon of 3-5 years or may be longer Citibank shares will definitely recover..investment carry risks otherwise put with banks better although other countries’ bank may also collapse..

I bought Citi at USD $1.22 also intend tohold long term..now consider another stock which hope to share with those interested.

One or two rotten apples doesn’t mean the rest are bad..rg Cosco,YZJ,and Epure esp the latter..I attended the AGM and spoke to the directors during the session and teabreak…they also got auditors on hand to testify the cash on hand..since ipo has been paying dividends,anyway the major shareholder is the International Finance Ltd..also bankers and fund managers also highly rate this counter..low risk at about 44cts…ever even bought at $1.20 and sold at $2.10 too..the counter has beeen adjusted 1 for 3 stock splilt to increase its liquidity so continue to remain high on institution’s radar

Daddy!! SG

Camb76, are you certain that a company's market cap could be increased by issuing more equity, in this case converting pref shares into common equity ??

jojobeach SG

My gut tells me.. there's gonna be some major sell off that's gonna plunge big Citi .

But then again.. maybe I'm just hungry.....

787180 SG

Jim Roger,the financial expert,who is now a S’pore PR remarked SG went in too early to buy BOA,UBS,Citi…probably out of favour to save these co….

But for us it’s better to think of our own pockets..time to load up more on EPURE before ex-dividend date and also to buy China Aviation Oil-after its previous trading oil deriative loss of S$550mil and its CEO jailed and released in S’pore,the co’s corporate governance and transparency shd now not be a problem..load up on these 2 counters to make some coffee money

Atobe SG

The stupidity of TS position is that we are being advised to forget about the fact that GIC had paid US$26.35 per Preferred Share that cost Singaporeans US$6.8 BILLION.

TS is expecting us to accept a new beginning for these Preferred Share to be converted to Ordinary Shares at a price of US$3.25 per Ordinary Share.

At US$26.35 per Preferred Share that cost Singapore an original investment of US$6.8 Billion - Singapore had received 258,064,516 shares.

This conversion is a ONE-for-ONE share exchange that will result in a total loss of US$5 Billion to Singapore.

This is not a situation that Singapore will get US$6.8 Billion worth of Ordinary Shares valued at US$3.25 that will inflate our holding from 258,064,516 to some wrongly hoped for stock volume of 2,092,307,692.

The fact that should not be forgotten is that the original lot of 258,064,516 Preferred Shares - which originally cost US$26.35 per share - will no longer have the status of being "Preferred" - but will be downgraded to "Ordinary Shares" valued at US$3.25.

TS is telling us to forget about the original value paid, and to rejoice at the current increases in the value of the shares - with the current advancement of the stock values from US$3.25 to US$3.85 per share.

jojobeach SG

The stupidity of TS position is that we are being advised to forget about the fact that GIC had paid US$26.35 per Preferred Share that cost Singaporeans US$6.8 BILLION.

TS is expecting us to accept a new beginning for these Preferred Share to be converted to Ordinary Shares at a price of US$3.25 per Ordinary Share.

At US$26.35 per Preferred Share that cost Singapore an original investment of US$6.8 Billion - Singapore had received 258,064,516 shares.

This conversion is a ONE-for-ONE share exchange that will result in a total loss of US$5 Billion to Singapore.

kekekeke... I thought TS was quite a crack up...perhaps his fancy loft in the middle of spring flower city was just another figment of his imagination afterall....no ?

Camb76 SG

I'm not going to reply to ignorant self-deluded posters who seek comfort in opinions rather than facts.

As for Daddy!!'s question, the press release below was released by Citi. Ask your neighbourhood investment banker for his/her advise if you don't fully understand it.

Citigroup Inc. (NYSE: C) March 19, 2009

NEW YORK – Citi announced today it has filed a registration statement with the Securities and Exchange Commission (SEC) in connection with its proposed offer to issue its common stock in exchange for publicly held convertible and non-convertible preferred and trust preferred securities. Citi anticipates launching the public exchange offer in early April, subject to completion of the required SEC review process.

Citi plans to file shortly two preliminary proxy statements with the SEC. One preliminary proxy proposes to amend Citi's Charter to, among other things, increase the number of authorized shares of its common stock and authorize the Board of Directors to execute a reverse stock split of its common stock. Shareholder approval to increase Citi's authorized shares is not necessary to complete the exchange of private preferred shares for interim securities or to exchange the public preferred shares for common shares. The conversion of interim securities to common shares will be completed upon adoption of the amendment to authorize additional shares. The other preliminary proxy proposes to amend the Charter and the certificates of designation of each series of its public preferred stock to amend the rights of holders of public preferred stock.

Citi also has entered into definitive agreements with all of the private holders of convertible preferred securities with an aggregate liquidation value of approximately $12.5 billion that were issued in January 2008. These definitive agreements reflect the terms committed to and announced by Citi on February 27, 2009. Completion of the private exchange transaction is subject to customary closing conditions, including receipt of required regulatory approvals and completion of the exchange with the U.S. Treasury.

Citi is in the process of finalizing definitive documentation of the U.S. Treasury's previously announced commitment to exchange a portion of its preferred securities with an aggregate liquidation value of up to $25 billion for interim securities and warrants.

As announced on February 27, 2009, Citi is seeking to exchange approximately $27.5 billion in public and private preferred securities with a commitment from the U.S. Treasury to convert up to an additional $25 billion of its preferred securities for common stock. Assuming full participation of public preferred shareholders, Citi will convert into common shares approximately $52.5 billion in aggregate liquidation preference of preferred shares.

Camb76 SG

Daddy!!,

The market cap you cite only relates to the common equity part of a firm's capital structure. But firms, in Singapore or US or UK etc., are capitalised from many other types of capital. There is common equity, preferred stocks, senior debt and junior debt. These are the four main categories of funding for a listed company. You see them on the right-side of the balance sheet, if you understand accounting. For a bank, the common equity portion of the capital structure usually tends to be very small. That is why banks are typically viewed as being highly "leveraged" companies.

In the case of Citi, its total assets according to its latest fourth quarter 2008 financial statement is US$1,938,470 mln. Obviously this could not have been funded out of only the common equity pool alone as it would have been much too small!

What this means is that there is no change to the total equity number on the right-side of the balance sheet when you convert existing preferred stock into common equity. In an accounting sense you are simply changing the categories of equity. There are legal and economic consequences however. Common equity, for example, has a lower claim on the company's assets than preferred stock or debt, so common equity owners loss everything in a bankruptcy.

AndrewPKYap SG

Barclays bought around 700 and at the moment:

Last Trade:

Merrill Lynch bought around 26 and at the moment around 80% the price of BofA:

Real-Time: 11.12 -1.14 (-9.30%) 3:30pm EThelp

Last Trade:

Citibank bought around ???? and at the moment:

(NYSE: C)

Real-Time: 3.44 -0.22 (-6.01%) 3:31pm EThelp

AndrewPKYap SG

Cursed despot setup a system to take as much as possible from the people to satisfy his gambling addiction inherited from his gambling addicted father.

Camb76 SG

I didn't start this post to defend the PAP government's policies. I really don't care much for Singapore politics as I don't live there anymore, and when I did live there I didn't feel strongly about the politics anyway. I started this post to offer interested readers the facts of GIC's Citi investment because there has been a proliferation of ignorant speculation about how much money that investment has lost or not lost in this forum. I have laid all the facts on the table, so every reader can judge for himself/herself. If Citi common stock falls below US$3.25 then the investment has lost money (ignoring the 7% interest raturn last year). If it is above US$3.25 then it has made money. If you want to criticise, at least criticise using facts instead of fantasies.

But I do want to comment about some of the posters on this forum who express such outrage about the PAP government's policies, such as the one who calls himself "Atobe". Atobe, in your statements you have impressed me with your moral outrage about the PAP government. Clearly in your eyes the Singapore government is oppressive and authoritarian. You spoke admiringly of the freedom and democracy found in the US and UK.

The freedom and rights found in Western nations did not come easy or cheap. At one time or another, thousands of people were ready to risk life and limb to fight for their rights. "Give me liberty or give me death!" was a popular slogan of the American War of Independence. These countries enjoy the liberty they now do because many courageous patriots were willing to die to achieve it.

So do you have the courage to match your convictions about the oppression you see in Singapore? Or is your moral outrage limited to anonymous Internet postings? All talk and no action. If you really feel soooo strongly about the political oppression in Singapore, then you are a coward if you don't dare to do anything tangible about it. When are you organising public protests outside Parliament? When are you forming a political party to overthrow the PAP? When are you standing for election as an MP candidate?

Do you have the balls to go along with your angry Internet postings? I doubt it. I believe you are too gutless and stupid to do anything that counts about Singaporean politics. You are a lion in the Internet but a tiny mouse in the real world. Let me tell you something, the world doesn't owe you anything. And if you are gutless and stupid, you will get nothing out of this world. Why are you so afraid? Too afraid to lose your pathetic 3-room HDB flat and taxi driver job?

The Mexican revolutionary Zapata famously declared that "It is better to die on your feet than live on your knees." You are one who lives on his knees, and you are too gutless and stupid to do anything about it.

Camb76 SG

And you know what "Atobe" stands for?

Anonymous Timid OBtuse Eunuch. A-T-OB-E.

Anonymous because you only dare to complain behind the anonymity of the Internet.

Timid because you lack the courage of your convictions.

Obtuse because you are stupid. More than that you are willfully ignorant. Black is white, and white is black for you so long as it fits your view point.

"Eunuch" because, need I say more?

jojobeach SG

And you know what "Atobe" stands for?

Anonymous Timid OBtuse Eunuch. A-T-OB-E. "Eunuch" because you are without balls.

Camb76, you're a real sore loser arn't you.

Atobe rat you out of your filthy little day dreamin hole and here you are .. cussin like a bitch.

What are you expecting ? That we should be so grateful you've enlighten us with your trash ?

Instead of bitching about Atobe's balls..why doncha counter Atobe's argument like a man.

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