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Morgan Stanley Will Be Citi Stake Underwriter
Senior Economics Reporter
Morgan Stanley has won a hotly-contested competition among Wall Street investment banks to be the underwriter and advisor on the sale of the U.S. government’s stake in Citigroup, one of the biggest stock sales in history, according to people familiar with the discussions.
Gregory Bull / AP
The government received the 7.7 billion of Citi
[C 4.31 0.04 (+0.94%) ] shares in return for billions of dollars of aid given to the bank during the financial crisis. But the government now stands to profit. With a current price of $4.31, the shares are worth around $32 billion, which would leave the government with an $8.2 billion profit. Japan’s Nippon Telegraph and Telephone sale of $36 billion of stock in 1987 would be the only larger stock offering in history.
As the advisor, Morgan Stanley [MS 28.85 -0.06 (-0.21%) ] will be required to set up a process where the government has little discretion over timing. Sources said the government aims to create regular sales that don’t attempt to time or game the market or appear to act on inside information. But sales can be halted if the share prices drops below some price.
As the amount of shares decline it’s possible that a large block of as many as a 1 billion shares could be disposed of in a managed sale or sales, sources said.
It was unclear if Morgan Stanley would be the sole underwriter on the deal. Typically a bank would choose one or more partners, especially a deal this size. Details were still being worked out this weekend, but a formal announcement could come as soon as Sunday.
The government still owns trust preferred in Citi, which it received from providing insurance for the bank’s assets. Those are valued at between $3 billion to $5 billion, but are less liquid than common shares. The government also owns 10-year warrants in Citi stock.