The Treasury Department is planning to sell its Citigroup common stock in small tranches throughout 2010 to avoid too much dilution to shareholders, according to analysts. But some wouldn't be surprised to see the Treasury get out quicker if the economy shows improvement.
The department accounted today that it intends to sell 7.7 billion shares, or roughly a 27 percent stake, using a pre-arranged written trading plan, it said in a press release Monday.
But the financial position of Citi has improved since the beginning of the year, when the Treasury backed away from a plan to unload its 27 percent stake after Citi issued new stock to repay its federal bailout funds. So some analysts say it's possible the Treasury will proceed with faster and larger sales of chunks of its stake before long, and that the move may even be profitable for taxpayers.
"The sale is likely to begin in a drip form, but we think there could still be a large block at some point," said Deutsche Bank analysts in a report following the Treasury announcement."With the recent strength in the stock - it's up 26 percent in the past month - a likely decent first quarter, and likely continued near-term improvement in macro trends, we believe a block sale is likely in the second quarter."
CNN Money reported that the sale from Treasury would likely deliver a return to American taxpayers, adding that the sale of the entire stake at Monday's opening price of $4.38 a share would generate nearly $34 million, delivering a profit of approximately $8.7 million to the government.
"There appears to be a growing sense that the worst is over for the once-embattled bank," CNN Money wrote. Citigroup is expected to break even in the first quarter or turn a small profit, thanks to a rebound in trading and a continued decline in credit costs.
Of course, all bets are off if the recovery isn't as strong as analysts seem to believe it will be. Talk is cheap.