For the last few years a friend of mine has said he bought shares of Citigroup for less than $5 per share and that he intends to hold them for the inevitable rise, however, after the 1-for-10 reverse stock split he’s lost his ability to garner substantial profits. And that’s why he bought Citigroup penny stock in the first place – for the potential reward of thousands of dollars from a relatively small investment.
Over the last few years he kept trying to convince me to buy a few thousand shares, and now I’m glad I didn’t. Let’s see if the stock price falls back to the ten to twenty dollar range… I lot of people hate Citibank, and who can blame them? Why should I pay more for the same junk stock?
The low price of Citigroup stock made it attractive to trade – representing as much as 10 per cent of US volume. It was averaging 6.1 per cent of daily US volume in 2011, according to Rosenblatt Securities. Since 2009, Citigroup options were frequently 2 per cent of US monthly volume. Citigroup’s market cap is around $124 billion. But that’s high compared to Apple computer, Google, etc. which actually have some form of business and societal value, whereas, a corporate bank is a corporate bank – and frankly Citibank as a brand, or as a company would not have been missed in a consumer sense if it had been allowed to fail and become bankrupt. But consumers would surely miss Apple computer or Google. People may only be expected to become passionate about banking when it involves a public community bank that serves the public well.
US equity markets exhibited a significant decline in daily trading volumes following a reverse split for Citigroup, by far the most heavily traded company stock.
I think the reverse stock split is negative to the psychology of individual traders – when C was cheap they could buy it knowing it might only drop a point or two, but now the share price is high enough to fall quite a bit – and there’s less upside profit potential compared to the rise of a cheap brand name stock.
*** Update:
Since May 6th to June 17th the share price has moved from around $45 to $38.
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