Question: If the stock symbol for General Motors
"Communism," I suppose, thanks to the overt financial backing from the U.S. Treasury for the very banks that caused the Great Recession. Well, no more. As we learned this week, the U.S. government is finally getting out of the banking biz. Yesterday, Treasury announced that after months of selling down its Citi stake, it's finally shaking out the last few shares from its kitty. And about dang time ...
Since starting to sell off its Citi stake, Treasury has unloaded shares in fits and starts, getting an average price of about $4.05 per share over the course of the past eight months. Now, as the end draws nigh, it's closing its position with a bang -- and a profit. According to Treasury, its last remaining 2.4 billion shares will sell for $4.35 a pop, yielding a total of $57 billion in revenue recouped on the U.S.'s initial $45 billion investment in Citi. That's a clean $12 billion profit for U.S. taxpayers.
Hooray for us!
Yes, indeed. You've been more than patient, and now it's time to get your reward. Tax refund checks should begin arriving in your mailbox shortly. (Not.)
The real question for investors, of course, is: "What happens, now?" I mean, the feds wouldn't be cashing in their chips, and making their biggest monthly dump of Citi shares ... ever ... if they thought the price would keep going up, right? Surely Citi shares have nowhere to go but down?
Not so fast (and don't call me Shirley)
If last month's GM cashout proved anything, it's that the government is "OK with a loss." It's not doing these stock sales to make a buck (though it won't turn up its nose at a profit). Rather, the feds' primary concern is getting out of these stocks, ASAP. In other words, there's no reason to assume that just because Treasury is selling, the stock won't go higher.
After all, Citi today sells for a lower forward P/E than does Wells Fargo
And now that the share price pressure from the government's selling spree is abating, maybe Citi'll have a chance to do just that.
At least, that's the way I see it. But what do you think? Take the Foolish Rorschach test, and give us your read on the chart up above, down below.
The Fool owns shares of Bank of America and JPMorgan Chase. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
More from The Motley Fool
Better Stock: Wells Fargo (WFC) vs. Citigroup (C)
The two banks have had plenty of ups and downs over the last decade or so. Here's the one I think has more "up" potential right now.
Wells Fargo & Company (WFC) Q4 2017 Earnings Conference Call Transcript
WFC earnings call for the period ending December 31, 2017.
Wells Fargo Earnings: Not Great, but It's All About the Future
Wells Fargo's scandal-filled 2017 weighed on earnings, but tax reform gave the company a fourth-quarter boost.