Government up 40% on Citi share conversion

Since we're occasionally accused of running hit-and-run negative news items that inflame blood pressure with no obvious "action steps" attached, here's a random bit of good news to help balance the scales.

Citigroup Shares: Treasury is up Almost $10 Billion Since Conversion:

UBS analysts figure that Geithner & Co. are currently in the money to the tune of some $10 billion, since they converted $25 billion dollars in preferred shares - out of a $52 billion preferred stake - at a price of $3.25. "Each penny increase in the stock price produces a $76 [million] unrealized gain," wrote UBS' Glenn Schorr in a note out early Friday. Citi shares are currently trading around $4.70, since the end of July they're up roughly 48%. ...

Oh, and besides the cool $10 billion Treasury stands to net, Schorr points out that the government still has some has $27 billion in preferred shares that Citi needs to repay at some point, which could represent another $2 billion or so in annual return.

You may recall that back in July we noted the government had done quite well when Goldman Sachs repaid its TARP money also, so at least in some of the cases the taxpayers are earning some solid returns on these bailout/loans.

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Mark Biller is Sound Mind Investing's Executive Editor. Visit www.soundmindinvesting.com to learn more.