Post-Split Selling Gets the Best of Citigroup (C)
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Citigroup (NYSE: C) had a disappointing first day of trading following its 1-for-10 reverse stock split. Shares of the banking giant closed at $44.16, down 2.3 percent from Friday's split adjusted close of $45.20.
Volume, a key element traders were watching post-split, was slightly better than expected.
After trading a fast and furious 13.5 million shares in the first hour, volume calmed down and ended the day at approximately 50 million shares. Many had expected volume to be around 40 million, or 10% of the normal daily volume of 400 million shares. Interestingly, dollar volume was actually higher than normal. At a average price of $44.20, dollar volume was approximate $2.2 billion today. If shares had traded pre-split that dollar volume would have been around $1.8 billion, based on the average daily volume.
Overall, NYSE market volume was sharply lower than normal due to the Citigroup reverse split.
Citigroup believes the split and reinstatement of a dividend will be positive for the shares, with CEO Vikrim Pandit stating the split will "reduce volatility while broadening the base of potential investors."
The higher share price, as a result of the split, could free up some institutional investors to buy the stock. Certain funds may have been unable to get involved with the stock because the price was below share price thresholds mandated by the specific funds. The dividend re-opens the stock to other investors.
Just last week Citigroup received a major vote of confidence from analysts at Morgan Stanley, which raised its rating on the stock to Overweight. The analyst noted the company is rolling off non-core assets quicker than expected, which could free up $19 billion through 2014 and could go toward buybacks starting in 2012.
Volume, a key element traders were watching post-split, was slightly better than expected.
After trading a fast and furious 13.5 million shares in the first hour, volume calmed down and ended the day at approximately 50 million shares. Many had expected volume to be around 40 million, or 10% of the normal daily volume of 400 million shares. Interestingly, dollar volume was actually higher than normal. At a average price of $44.20, dollar volume was approximate $2.2 billion today. If shares had traded pre-split that dollar volume would have been around $1.8 billion, based on the average daily volume.
Overall, NYSE market volume was sharply lower than normal due to the Citigroup reverse split.
Citigroup believes the split and reinstatement of a dividend will be positive for the shares, with CEO Vikrim Pandit stating the split will "reduce volatility while broadening the base of potential investors."
The higher share price, as a result of the split, could free up some institutional investors to buy the stock. Certain funds may have been unable to get involved with the stock because the price was below share price thresholds mandated by the specific funds. The dividend re-opens the stock to other investors.
Just last week Citigroup received a major vote of confidence from analysts at Morgan Stanley, which raised its rating on the stock to Overweight. The analyst noted the company is rolling off non-core assets quicker than expected, which could free up $19 billion through 2014 and could go toward buybacks starting in 2012.
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