Wednesday, April 24th, 2019

Who Owns Citigroup?

 

As the question of who owns Citigroup gets settled, options on Citigroup are through the roof. The news reports that the U.S. government is selling its stake in the financial giant. Who owns Citigroup will no longer be the Feds. Outstanding options contracts on Citigroup surged to over twenty-five million. That translates, of course, to over $2.5 Billion shares that could conceivably change hands. Calls are running roughly two to one over puts as investors assume that the ailing financial giant’s stock will rise. Although Citigroup did not go into bankruptcy and emerge in an IPO like GM did there are some similarities to GM options in this scenario. Both companies survived the market crash with substantial government intervention and have the potential to become very large and profitable business entities again.

Citigroup operates under the Citi brand. It was formed in a merger of Travelers Group and Citicorp in the late 1990’s. After experiencing large losses during the 2008 global financial meltdown the company received $25 Billion in bailout funds from the US government for which it eventually gave 27% of the company’s stock shares to US taxpayers. Despite suffering huge losses in 2008 the company is still the world’s largest financial services network employing over a quarter of a million people throughout the world. Other large shareholders are from the Middle East and from Singapore. Succeeding in options trading of a company such as Citigroup requires an appreciation of its long term potential and the financial clout of who owns Citigroup. The company was not allowed to go under and be broken up and is now poised to rise from its own ashes.

Many buying calls on Citigroup seem to think that these are good times for trading options on this company. One of the four largest US banks, along with JP Morgan Chase, Wells Fargo, and Bank of America, Citigroup has traded between $3 and $5 a share over the last year. A focus of options trading is currently January $5 calls. Considering that Citigroup was selling at $3 a share a couple of years ago many traders are expecting a continued recovery of the company.

As the majority of options contracts are calls traders are predicting a rise in Citigroup’s share price. When to buy puts on Citigroup is, of course, when one expects a fall in its share price and a return to less promising circumstances. With the news of the government selling its shares two things come to mind regarding the question of who owns Citigroup. One is that more shares are now available for the rest of us folks. The other is that Citigroup will not have a government watchdog on its board of directors telling the company what to do. Certainly there is a good argument that the company, as well as most banks and financial institutions, could have used better advice prior to the 2008 crash. However, investors, over the long run, tend to believe that keeping bureaucrats out of the board room leads to more profits. And, the current answer to who owns Citigroup could now include you.

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