Citigroup’s Exchange Offer Harvard Case Solution & Analysis

Citigroup faced considerable distress in early 2009. In late 2008, the bank had accepted $45 billion in preferred equity from the United States government via the Distressed Assets Relief Plan (TARP). However, the stock had sustained to slide prematurely in 2009. The case asks students to evaluate the pricing of preferred stock at the moment.

Traditional sources of arbitrage capital have been depleted, and as the case occurs during a period of significant uncertainty in international capital markets, the apparent mispricing may not be as attractive as it seems. In B and C cases, students must choose whether their view of the pricing that is appropriate changes, when the clear mispricing worsens. A closing added teaching point associates to the formation of a synthetic short position using the options markets.

PUBLICATION DATE: July 06, 2009 PRODUCT #: 210009-HCB-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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