Wednesday, January 21, 2009

Prince Alwaleed Profit on Citigroup Gone

What was one of the most successful and heralded investments of the past decade is now turning into a paper loss. Amazing.

Saudi Prince Alwaleed bin Talal, who made his investment reputation by putting money into Citicorp 18 years ago, once had a $10.7 billion paper profit on the stake he bought. Now it’s all gone.

Citigroup Inc., the company formed when Travelers Group Inc. took over Citicorp a decade ago, closed at a lower price yesterday that Alwaleed effectively paid for his $590 million investment in 1991.

The CHART OF THE DAY shows how Citigroup’s share price and market value have plunged since the end of 2006, when the stock peaked at a record $57. Before the descent, the prince had an 18- fold gain on his holding.

Alwaleed received preferred stock in Citicorp that was convertible at $16 a share. After adjusting for the Travelers deal, a subsequent spinoff of Travelers’ property and casualty insurance business and two stock splits, the price amounted to $2.98 for each Citigroup share.

Citigroup dropped below that threshold yesterday for the first time since its formation. The stock’s 20 percent decline, to $2.80, left the prince with a $35 million loss on the initial stake, excluding dividends.


This shows just how much Wall Street has changed. I've view Citigroup as a symbol of the buildup and success (and excess) of Wall Street over the past decade, and its subsequent fall is fitting.

I've always found prince Alwaleed to be quite interesting. His biography is worth reading if you have the time. I did a book review of it awhile back, if you're interested.

Article via Bloomberg.

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