One Of Citigroup’s Preferreds Is Defying Gravity Again – Citigroup Inc. (NYSE:C)

Introduction

As anyone who has monitored preferred stocks over the last weeks can probably guess, in this article we will be taking another look at C-N – Citigroup Capital XIII, 7.875% Fixed/Floating TruPS Trust Preferred Securities (NYSE: C). Strong buyers have pushed up the price to insane levels, and we believe that regardless of the information that they may possess, for the average investors this is no place to buy or hold, but rather to cash in and find a better investment.

In our previous article, we discussed the pitfalls and what your other options might be. But since then, there have been some rather interesting IPOs, and this revisit comes with a rather good timing.

Before we continue any further, it is probably worth mentioning that C-N is no ordinary preferred stock, and it is classified as a Capital Security, which relates it to Basel and the Dodd-Frank Act. This means some brighter mind out there might have a good idea as to when the bank will consider redeeming the issue, but even if we had an approach towards doing this kind of analysis, the risks of being wrong outweigh any potential gains. That being said, any discussion on the matter by fellow SA members will be greatly appreciated.

The Product

We already mentioned that the preferred stock in question is C-N. And for the sake of being thorough, we will closely examine the product:

  • Call Price: $25.00
  • Liquidation Price: $25.00
  • Call Date: 10/30/2015
  • Maturity Date: 10/30/2040
  • Nominal Yield (as of 10/30/2015): 6.37% + three-month LIBOR
  • Credit Rating: Ba1/BB+
  • Current Yield (as of 7/28/2017): 7.28%
  • Last Price (as of 7/28/2017): $27.06
  • Stripped Price – Accrued Dividends Excluded (as of 7/28/2017): $26.91
  • Yield-to-Call (as of 7/28/2017): -86.16%
  • Call Price – if the issue is called with a one-month notice: $25.15

There are multiple obvious flaws with the current market valuation from the product, and there is no real need to elaborate on them because the numbers say it all. To wrap it up – your…

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