Hedge fund manager Bill Ackman said that his hedge fund, Pershing Square Capital Management, purchased 146.5 million Citigroup shares because he expects the New York-based financial services company to soon be able to return billions in dividends to its shareholders and benefit from various large tax breaks.
“We think there are two important elements of Citi that the market does not fully appreciate,” wrote Ackman, who tends to make only a few concentrated bets at a time.
He added that Citigroup, Inc (NYSE: C) will benefit from a $21 billion operating deferred tax asset which will shield its future earnings from federal taxes during the next few years. Ackman also believes that the company will have $24 to $30 billion in capital to give back to investors as it divests itself of businesses in its Citi holdings division.
“At its recent price of $3.64, Citi trades below tangible book value, and at five or so times management’s earnings guidance,” Ackman wrote.
Pershing Square capital Management has put about 9% of its main fund’s capital into Citigroup, Inc (NYSE: C).
