The U.S. Treasury could see a substantial windfall as it begins to sell its shares of Citigroup, which were obtained as a condition of its bailout. Officials announced this morning that they would begin sales of the government's 7.7 billion shares of the banking behemoth as early as today, with a 1.5 billion initial offering. The total shares offered amount to around 27% of Citi's shares outstanding. If sold at current share prices, then the Treasury will do quite well on its investment.
How well? It paid $3.25 per share, which accounted for $25 billion of Citi's bailout. If it sold all its shares at the stock's price of $4.70 as of noon, it would produce $36.2 billion -- a profit of $11.2 billion, which is about a 45% return. Who knew the government was such a savvy investor?
Of course, it's a little unclear whether the Treasury will manage to secure that price or not. The government appears to be at least as concerned with who will be purchasing these shares as for how much. The press release takes time to note that the Treasury told its broker "to provide opportunities for participation by small broker-dealers, including minority- or women-owned broker-dealers." If this wasn't the government we were talking about, all parties would be forced to pay the prevailing market price, but since the Treasury isn't a profit-seeking entity, politics could be put ahead of price.