Citigroup (NYSE: C) announced Thursday that shareholders approved a proposed authorization to substantially increase the number of outstanding common stock. The move was needed for Citigroup to proceed with a share exchange, giving the U.S. government and other private investors common stock for their interim investments.
Interim securities were received on July 23, 2009 by the U.S. government and private investors in exchange for their convertible preferred shares, which were valued at about $12.5 billion. This action was the first step in the banks plan to execute a share exchange.
On June 18, 2009 Citi sent out a proxy statement to shareholders seeking approval to raise its share authorization. Shareholder approval now gives Citi the right to increase its outstanding common stock to 60 billion shares.
At the conclusion of the share exchange, Citi estimated that it will have 22.8 billion shares outstanding, compared to just 5.5 billion at the end of June. The U.S. government will end up holding 33.6% of Citi’s outstanding shares when the exchange is complete, which works out to roughly 7.69 billion shares.
Citigroup said the conversion will be effective at the close of business on Sept. 10, 2009.
The U.S. government has already said it would swap up to $25 billion worth of the preferred securities it holds from Citi; about half of which was converted back on July 23.
If further exchanges are done, the U.S. government’s share of Citigroup common stock holding could increase well past the 33.6 percent it will hold come mid-September.
Additionally, Citigroup shareholders approved a resolution that allows, but does not require, the Board of Directors to execute a reverse stock split at any point before June 30, 2010. The board was given seven different split ratios to choose from.
