Citigroup - A Bargain?
I have been wondering why no one bought Citigroup. In 2007, the company stock was supposed to be worth about $850B. There are about 5.5B shares outstanding. So, when the price went below $1.00, it might have been a great bargain for an astute entrepreneur. All of the outstanding shares could have been purchased for $5.5B. Of course this premise assumes that such a huge bulk purchase would not have moved the price up with the "greater fool" herd mentality of stock traders. But there were no takers at that price to do an acquisition. So, perhaps the company is not really worth $1.00 per share. Maybe an informed investor with $5.5B, who could have had the entire company, did not want want to liabilities that would come with it.
I started to wonder about this during the discussion about the company's management. If an astute investor did purchase a controlling interest in Citigroup, I wonder if the current management would stay in place? Would the stock move up with new management?
It would seen that an investor with $5.5B would be savy enough to accumulate that kind of cash. They might have a more in-depth understanding of the true value of the company. It seems no big players decided to seize to opportunity. The recent price movements in the stock seem to be based more on government bailout efforts and not corporate profit expectations.
The premise of a free market excludes intervention from an outside market force unrelated to the operation of the enterprise. We see less of that in these days of TARP and other government intervention. Now, stocktraders can only bet on what companies will fare best as the government cash is delivered to company cofers. So, it would seem the smart money is betting on the government plays more than the profit potential of the company. That seems to move the stock price more than market forces.
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