We noted the other day that the Citi reverse stock split was a huge moment for high-frequency traders, which had feasted on the stock back when it hovered around $5 a share. These traders generated massive trading volumes and made a small fortune on the various rebates paid by exchanges.

But the reverse split lifted the stock price instantly by a multiple of 10, and volume promptly cratered, as expected, as high-frequeny traders moved on to other stocks, perhaps Lucent and Sprint.

As for Citi, what we still do not know is whether the other expected consequence--higher institutional ownership--will materialize. It was no secret that Citi's efforts to revive its stock price was hampered by the unwillingness of institutional investors to own low-priced stocks. Indeed, at some institutions, there are rules in place that prevent such investments.

The hope now is that the firm can embark on the type of IR campaign that will draw more institutions.

The company is saying the right things, all but promising higher dividends, and yet the jury is still out. A lot of course will depend on the fundamentals of the bank going forward. It's by no means a slam dunk.

One analyst at Susquehanna Financial Group has noted that the reverse split will also make it easier to short the stock, as some broker dealers proscribe shorting for low-priced stocks. This might make for more volatility. After AIG reverse split its stock, the shares fell 67 percent in the first two weeks after the reverse split and then gained fivefold in less than two months, the analyst said.  

For more:
- here's an article from CNBC
- read a Barron's article 

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