Citigroup Inc. said it is selling a huge chunk of its stock at a steep discount to raise the cash it needs to repay bailout funds and free itself from government support.
But the government backed out of selling any of its 34 percent Citi stake, apparently due to the tepid investor response and the weak price garnered by the $20.5 billion equity offering — described by Citigroup as the largest in history.
Citigroup said it is selling 5.4 million common shares at $3.15 apiece, an 8.7 percent discount to yesterday’s close. The bank is also selling 35 million tangible equity units, which can be converted into common stock at a later date, for $100 each.
Citigroup’s shares dropped 25 cents, or more than 7 percent, to $3.20 in after-hours trading.
Citigroup is selling the shares as part of its effort to repay $20 billion in federal bailout funds. The bank announced the offering on Monday, shortly before Wells Fargo & Co. announced plans to raise capital through a public stock offering to pay back its own government bailout loan.
In total, Citigroup received $45 billion as part of the Troubled Asset Relief Program, or TARP, to help it manage through the credit crisis as it suffered under the weight of souring loans.
Citigroup only had to pay back $20 billion because the remaining $25 billion was converted into a 34 percent ownership stake in the bank earlier this year. The government paid $3.25 a share for its stake, which means it would have lost 10 cents a share in the offering.