What the article does not go into is some basic truths. I'm no market broker, only someone angered enough at what i've seen in the past few months to spend a little time increasing my little knowledge of these events.
Look at Citigroup. they want an extra $75 billion dollars and are offering 40% of the company. Does that sort of statement seem familiar to anyone. Yes thats right 'Dragons Den' where someone wants an investment in the company and are offering a stake in the company. The dragons use their accumalted expertise to judge firstly how well the company is doing, then what the future for the company could be, financially that is, and then lastly they look at the projected earnings of the company compared against the net worth. They then use this knowledge to either
lambaste those individuals, (saying your product is shit, not worth investing in, or 'are you taking the piss') or they make them an offer, usually increasing the overall percentile stake in the company, depending on the perceived worth of the company.
Now the above chart shows the range of share price worth from last february until today, starting at $22.10 a share to todays $2.14 a share. A pretty
'merde' year if you'll pardon my french. Also take into account the last bailout they had in November $300 billion, which actually shows up on the index as one of their worst months for trading, so is a bailout really the answer?.
What really bugs me is this:
I've highlighted what i perceive to be the most interesting number: Market Cap 11.66B which translates to $11.66 billion. The Market Cap for this company is $11.66 billion, now market cap is basically the net worth of the company this is worked out by the amount of shares in circulation and the price of each share. So a quick Google shows up
11.66 billion divided by 2.14 = 5.44859813 × 10^9 , thats 5.44859813 times 10 to the power 9 which = 5448598130.
So thats 5448598130 shares in circulation.
Each share is worth $2.14
So lets try to forget about the $300 billion bailout in November "
Massive 300-billion dollar rescue for Citigroup" which actually took place on a sunday when most politicians are at home with the kids. So who the **** engineered that bailout. Anyway as i've already stated the share prices for November were pretty shit already and the bailout did nothing:
At closing of trade on Friday the 21st of November the share price was $3.77, now without counting the rest of the money put into the company 25 billioun here some more billions there Guarantees of 90% of all toxic assets, what was the market cap then?
Well from my earlier figures, remember Market Cap equates to share price mulitplied by the amount of shares available, so:
5448598130 shares at $3.77 = 2.0541215 × 10^10
2.0541215 × 10^10 = 20541215000 = 20.6 billion.
So Market Cap at that time (21st February 2008) was only $20.6 billion
and two days later the federal government gave them $300 billion dollars and also guaranteeing 90% of all toxic assets.
The sums they give for a 40% stake at present dont add up, unless my sums are wrong (I hope they are, so please please put me right),
40% of $11.66 billion dollars is $4.66 billion.
Asking for $75 billion dollars for 40% is hugely over priced, in fact
$75 billion divided by $4.66 billion = 16.0944206
So $75 billion is 16 times what the company is worth.
US citizens should already own the company as the last bailout in November was already at that time 14 times what the company was worth:
300 billion divided by 20.6 billion = 14.5631068
So after acquiring all this knowledge in one short morning, I can tell you my answer now.............
"I'm Out"
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