Wednesday, April 30, 2008

Citigroup in Trouble?

Citigroup just sold $4.5 billion of shares of its stock, and sold an additional $6 billion preferred stock sale. Reports are that it is likely to face more write-downs in the future and may need to raise even more capital.

According to reports of analyst reports, Citigroup management has shifted from believing it was essentially done raising new capital to signaling it is interested in raising more capital.

The willingness to raise more money is a warning sign to some investors, because companies are typically reluctant to issue equity capital, which can be dilutive and boost dividend obligations.

The financial services meltdown isn't over yet. How many brokers are going to be jumping ship in light of this piece of news?
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