Value Investors Club / Citi AA Pref Stock (C AA PREF)

Description

I'm recommending a relatively simple arbitrage trade between the Citi AA Preferred stock and the Citi common stock. The absolute rate of return based on today's announcement is approximately 50%. You will be given the option to convert your pref stock to common based on a common price of $3.25 and valuing the prefs at face. In the downside event that Citi goes bust, you will be net short and your short is junior in the capital structure to your long, so you should make good money. Here's the arb in absolute returns:

Number of Shares of C Series AA Prefs Purchased					1.00
Purchase Price per Share					8.88
					----------
Total Purchase Cost					8.88

Face Value per Share					25.00
Conversion Price					3.25
Number of Shares Converted per Pref					7.69
Number of Prefs					1.00
Total Common Shares Received					7.69
Ending Stock Price					1.72
Value of Shares					13.23

% Return					49%

I don't have much more to add here and apologize for the brevity, but I wanted to get this posted ASAP because I don't know how long this will last. Questions are welcome.

Catalyst

Deal Closes

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			2009	2010
Price:	8.88	EPS	nmf	nmf
Shares Out. (in M):	149	P/E	nmf	nmf
Market Cap (in $M):	1,320	P/FCF	nmf	nmf
Net Debt (in $M):	0	EBIT	0	0
TEV (in $M):	0	TEV/EBIT	nmf	nmf