Dilution issues at Citigroup

May 5, 2008

When banks were in a frenzy of preferred share issuance not too long ago, a few analysts raised the issue of eventual dilution. Now that CitigroupÂ has gone ahead and raised $4.5 billion in common shares, the issue cannot be ignored. The Motley Fool notes that the offering prompted Goldman Sachs to slash estimates and that the value of the stock is barely above book value. So you have to think that the bank has hit the limit it can raise via common and preferred shares. So that leaves asset sales, big one-time investments and--gads--another dividend cut. A tough spot for existing shareholders. Â

For more:
- here's the Motley Fool article