Now There's a Good Buy?

Shares of Citigroup Inc., once the most powerful U.S. bank, fell below $1 a share Thursday.
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The stock fell to 97 cents in late morning trading, down 16 cents or 14.2 percent from Wednesday.
New York-based Citi has lost more than 85 percent of its value so far this year, and is down more than 95 percent from a year ago as the bank was pummeled by the financial market crisis.
Citigroup's shares will remain on the New York Stock Exchange. Last week, the NYSE relaxed its listing rules to allow stocks that fall under $1 to still be listed and traded on the exchange.
The exchange said the change was warranted given the "current period of unusual market volatility and decline."
Ordinarily, an NYSE-listed company's shares cannot remain below $1 for more than 30 consecutive days. If that happens, the company gets about six months to prove to the NYSE it can boost its stock price.
Citigroup used to be not only the largest bank by assets, but also by market capitalization, which has now been decimated by the stock's decline. At the start of 2007, its market cap was riding high at around $270 billion. But by March 2008, it had fallen below the $100 billion mark. Now, it's at $6.2 billion.
As the recession deepens, the problems facing Citigroup — souring loans and the impact of the recession — are only getting worse.
On Friday, the government agreed to exchange up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The government, along with other private investors, will convert some of their $45 billion in preferred stock into common shares. If the maximum amount of preferred stock is converted, current common stockholders will see their ownership stake fall to about 26 percent.
The deal between the Treasury Department and the bank is the third rescue effort in the past six months.
The problem is the market knows Citigroup received no new capital last week. The conversion to common stock will create a wider equity base aimed at keeping investors calm as the economy deteriorates — but Citigroup still has $45 billion in Troubled Asset Relief Program funding, the same amount as it did before. The switch to common stock will help boost Citigroup's "tangible common equity," Wall Street's and Washington's new favored gauge of banks' health.
Citigroup, criticized for years for being too multi-tentacled, has already sold off several businesses over the past several months.
It has also split into two parts: Citicorp and Citi Holdings — effectively undoing the merger that created the company in 1998. Citicorp holds the company's "core" businesses like retail banking, investment banking, credit cards and transaction services, while Citi Holdings runs the company's riskier assets, the consumer finance franchises and asset management.
Citigroup, which hasn't turned a profit since the fall of 2007, will face its next test in April when it reports first-quarter earnings.