Citigroup Inc. is facing potential losses of up to A$41 million ($26 million) after struggling to fully sell a block of shares in Goodman Group, an Australian real estate company, which it had underwritten for China’s sovereign wealth fund.
The bank initiated the sale of 50.4 million Goodman shares on Tuesday evening, with a floor price of A$37.55, a slight discount of 1.5% from the previous close of A$38.12. However, investor demand for the price range was weak, prompting Citigroup to relaunch the deal with a wider discount of 3.3%. Despite this, the sale still fell short, and only 23.4 million shares were sold at A$36.40, representing a 4.5% discount to the previous close. As a result, Citigroup incurred a loss of A$27 million on the transaction.
Citigroup was left with 27 million unsold shares, which, at Wednesday’s close of A$37.02, were worth just under A$1 billion. This left the bank with an additional paper loss of approximately A$14.3 million. The bank may recover some of these losses if the stock price improves or if it has hedging strategies in place.
Citigroup did not provide any official comment on the matter. According to reports, the bank’s move was seen as a risky decision due to the timing of the sale late in the year when banks typically focus on securing their revenues. Citigroup is currently ranked first in managing equity and rights offerings in Australia and New Zealand, with nearly 14% market share this year.
China Investment Corporation (CIC), the sovereign wealth fund involved, will not face any losses, as the block deal was fully underwritten. A CIC unit has been a shareholder in Goodman for over a decade, with the 50.4 million shares representing about a third of its stake in the company.
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