Citigroup faced significant misery in early 2009. The stock had constantly diminished in early 2009. In late February, the corporation declared that it would convert as much as $50 billion of preferred stock into common stock, at $3.25 per share. The case asks students to evaluate the pricing of preferred stock relative to common stock at the moment.
Conservative sources of arbitrage capital have been exhausted, and as the case occurs during a period of significant indecision in international capital markets, the obvious mispricing may not be as striking as it looks. In the B and C case, students must determine whether their view of the pricing that is proper changes, when the apparent mispricing worsens. A closing added teaching point connects to the formation of a synthetic short position using the options markets.
PUBLICATION DATE: September 30, 2009 PRODUCT #: 210004-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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