I did a ballpark (oversimplified) valuation on Citigroup, saying C should be worth more than last Friday’s closing price $1.50. Today C dropped 20% to $1.20, worse than other major banks.
I have to say I don’t understand what Mr. Market is thinking. The dialogue between the conversion scheme and the market goes like this:
The conversion: “We shall convert the preferred shares to $3.25 per common share.”
Mr. market: “It’s a bad deal for common holders. The per common share value should be worth more than the conversion price ($3.25), so that I decide to adjust the market price down to $1.20.”
Dah..
Either the conversion is expected not to go through, or something drastic will happen.
No comments:
Post a Comment