Citi preferred stock shareholders are trying to decide whether or not to convert their preferred stock shares to Citi common stock. While the 7.3 to 1 conversion ratio is appealing, key to making this decision is the resulting, post-conversion value of their Citi common shares. Preferred shareholders know, sitting here today, what their preferred shares are worth; they do not know what their common shares will be worth if they choose to convert.
I've been watching for some type of supportable concensus to build. Like many, I read everything I can find regarding Citi and this conversion. And I watch blogs that are dedicated to the interests of those investing in Citi equity. I also subscribe to a service that finds new blog postings that mention the phrase "preferred stock" and sends me a copy.
After digesting all of this, I can say with a certain amount of authority that there is absoluetly no consensus whatsoever regarding the effect that this historic conversion of Citi preferred stock shares is going to have on the common stock market price.
Citi doesn't even know. While Citi seems to think that the market price of their common stock is going to go/stay down after this conversion, there is substantial evidence to suggest that Citi has no clue how low it might go. Citi has filed with the SEC to perform a reverse stock split after the conversion, but the filing provides Citi's Board of Directors with a menu of seven split ratios that they might pick from (or not).
If Citi is unable to judge what the value of their common shares is likely to be after this preferred stock conversion is completed (end of this month), how are preferred shareholders suppose to (a) figure it out and (b) make an educated decisision whether or not to convert their shares?
To see examples of the confusion on Citi blogs (click here and click here). These are typcial of the discussions that I see every day. Interesting, yes; Definitive, no.
I'll keep looking. But for now there is just no consensus regarding what Citi preferred stock shareholders can expect of the value of their holdings, post-conversion. If you're feeling like you are short the information that you need to make a good decision, you are not alone.
Many Happy Returns.
