NEW YORK CITY, NY., Sep. 8 (TOTI) --

Authorized shares of Citigroup (NYSE:C) stock will reach 60 billion after shareholders passed three resolutions designed to decide on the role of the US government in the company. After the new stock issuance, Uncle Sam will own 32.5% of C.

After the deal is done, C shares will be diluted by approximately one half. After the close of business on September 10, Citgroup will have 22.88 billion shares outstanding.

The company will also be able to issue a reverse stock split between now and June 30, 2010. Most experts think that shareholders can expect one share for every seven they own when the final details emerge.

At that point most shareholders will hold fewer shares of Citigroup stock, but they would be worth more money.

Bright spots for investors are that C gets to retire the preferred shares that the government owned, which means they won't have to pay dividends. There should also be a positive affect on the balance sheet.

In not so good news, Citigroup continues to struggle operationally, as do most banks. Credit quality in both the consumer and business segments continues to degrade, and the final tally of credit losses remains unknown. Although the company has been aggressively re-structuring, there is no indication how well the plan is doing. Plus, Citigroup is constrained due to government oversight. It remains to be seen how this relationship will affect their operations in the near term.

It should be an interesting week for C shares, especially after September 10. The company has apparently dodged the bullet of going under, but shares will suffer until net profits emerge from their restructuring efforts.

Courtesy: WSE

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