Citigroup’s shares rallied last week, on the back of CEO Vikram Pandit’s “leaked memo” reassurring his troops that “we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007”.
Shares of the financial services provider have been under constant pressure since its bailout by the US government and for a while traded below US$1 (the first blue-chip stock ever to slip below US$1, according to Dow Jones data going back to 1970). Ignoring Pandit’s postulation that “our stock price is not an indication of our financial strength”, is this an attempt by the under fire CEO to give Citi’s shares a much needed boost?
Previously, if a company had an average stock price below US$1 for a 30-day trading period, the company would face the risk of having its stock delisted by the NYSE. However, the NYSE has announced that it was temporarily suspending its US$1 minimum price requirement until June 30. (Battered companies must be breathing a collective sigh of relief.)
But I digress. The point is: Why should investors believe any numbers coming from the mouth of someone who, for a long time, had no idea of the bank’s existing problems? Could some of the “profits” highlighted by Pandit be nothing more than adjustments to previous quarter’s write-downs? And what about the motivation behind releasing such a memo at this point of time? The company is set to review first quarter 2009 financial results next month (April 17 if I’m not mistaken) so what’s the hurry to bless the market with the good news?