Citi Stock at $1 a share – Cool; Right Issues – Boo

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Mar 06 2009
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Who would have thought that the mighty Citigroup Inc. (NYSE: C, stock) could become a penny stock one day? It was unthinkable as the American brand was once the most powerful bank on the planet earth and to flash your Citibank Credit Card was a privilege that Mr. Bean would not get tired of. Citigroup has lost more than 85% of its value so far in 2009 and is 95% below where it was the same time last year. The stock was so worthless that it should be taken out from the NYSE but the authorities relaxed its listing rules to allow stocks under a dollar to maintain their listing. That’s right! Citigroup stock plunged to less than a dollar to RM0.97 a share Thurs 5th Mar 2009 before closed at $1.02 a share.

As superstitious as it may sound Citigroup could fare better if it were to maintain its 137-year-old former red umbrella logo which it sold back to its original owner St. Paul Travelers in 2007. Dow JonesIt’s better to have an umbrella for the rainy day, no *grin*? Now who dares to argue the effect or influence of feng-shui in corporate log design? With the stock price basically flushing down the toilet I guess it won’t do any harm for Citigroup board or President Obama administration to consult feng-shui expert on this matter. Heck, even Malaysia CIMB’s Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023) which is fighting neck-to-neck with country’s (previous?) biggest lender Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155) for the number-one spot has market capitalization higher than Citigroup.

Bumiputra-Commerce has market value of over RM22.2 billion against Citigroup’s RM20.5 billion ($5.56 billion), which has since slides as the 184th biggest bank by market value. Citigroup which was worth more than $277 billion in late 2006 is now under pressure and could see the stock taken out from the DJIA’s 30 blue-chips companies. At this juncture you might be wondering if you should get yourself a cup of coffee, a pack of chewing gum or a share of Citigroup. After China failed to deliver the much-hype stimulus package and General Motors Corp.’s warning of a collapse, the Dow plunged another 280-points *yawn* to 12-year low at 6,594.44. And the freefall to test the 6,000 support level could be reached within this month alone *scary*.

Citigroup Stock ChartNow do you know why I keep on screaming “Cash is King” and “Preserve your Cash”? Don’t you feel good looking at your escalating buying power now? And please ignore the cash calls or right issues proposed by those so-called blue-chips such as Maybank, TM International Berhad (ignored such call), HSBC, DBS, CapitaLand and whoever next in the queue. Unfortunately if you’re already one of the shareholders you may see your holding’s value further diluted once the right issues exercise completed. As a matter of fact your money could have sucked up indirectly as a result of poor management (such as in Maybank’s regional banks acquisition) or simply leakages (hanky-panky in Indonesia’s BII deal?).

You do not need to become a rocket scientist to know that to have Permodalan Nasional Berhad (PNB) and Employees Provident Fund (EPF) agreed whole-heartedly in subscribing 55.7% and 13.7 % respectively of the RM2.74 a piece right issues are tantamount to “bailout” Maybank. And PNB is asking for another 20% in excess of the right issues? This is almost the same like AIG holding the U.S. government hostage at gunpoint when it demanded another $30 billion in loans, in addition to the $150 billion it has already been given. Therefore why should you subscribe to the right issues especially during current bearish market?

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