Citi Stock Split: Will Citi Announce Another Stock Split in Near Term Future After 11 Years?
Citi Stock Split: In this article, we will trace the journey of Citigroup stock on the stock market which included eight stock splits on different occasions which were induced due to different reasons. We will also explore the possibility of a future split for the company.
The financial crisis of 2007-08 – Lehman brother crisis changed the way banks function today. It forced various banks to shut down forever and even big institutions like Citigroup came on the verge of disaster. It forced various stocks to become penny stocks and stocks trading below $5 for a couple of years down the line. Citigroup stock also touched $1 in March 2009, after facing a free fall in the previous two years starting from June 2007.
Citi Stock Split: Citigroup Stock Split History
The company began its trading journey on the US stock exchange in the year 1987 at the opening price of $21.35. In this trading journey of 42 years, management has decided to split the stock 8 times, out of which 7 were forward split and the last one in 2011 was a reverse split. The date and ratio of all the splits are tabulated below.
| S.no | Date of Split | Ratio of Split |
| 1 | Feb 26, 1993 | 3:2 |
| 2. | August 27, 1993 | 4:3 |
| 3. | May 24, 1996 | 3:2 |
| 4. | Nov 22, 1996 | 4:3 |
| 5. | Nov 19, 1997 | 3:2 |
| 6. | May 28, 1999 | 3:2 |
| 7. | August 25, 2000 | 4:3 |
| 8. | May 9, 2011 | 1:10 |
Citi Stock Split: Inferences from Stock Split History
As one can see, Citigroup has a long history of Citi stock split and we can draw a number of inferences from these splits to understand the thought process of management.
- The stock split history of Citigroup is similar to various other big tech companies like General Electric company, Nvidia, and Amazon Inc. General Electric company had eight stock splits including the most recent reverse stock split announced in August 2021. Citi announced seven splits in a range of seven years and then did not touch the topic for the next eleven years. A similar trend is seen in the split of GE (which did not go for a split for 19 years between 2000-2019), Nvidia (which announced four splits till 2007 and then waited for 14 years for the next split), Amazon Inc (announced 3 splits in range 1998-1999 and then waited for 21 years for another split).
- Another inference is that the ratios of the split are not even 2:1 for the first seven splits. Either it is 3:2 or 4:3 for the first seven splits. It is probably done with the intention of remaining in the news frequently. For example, the first split was 3:2 in February 1993 and then 4:3 in the same year in August 1993, the same could be achieved with a 2:1 split at one time. Again, the split ratios were similar in 1996, the splits were 3:2 and 4:3 in 1996, which could be achieved by a single 2:1 split. The splits were 3:2 in 1997, 1999, and 4:3 in 2000. The three splits can be done with a single 3:1 stock split. The final result of seven splits could be achieved in three splits, but management preferred a larger number of splits to remain in focus with retail investors.
Citi Stock Split: Latest Tweet
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Citi Stock Split: The Reverse Split of 2011
Citigroup Inc was a darling of the stock market in the late 1980s and 1990s. But the real fall for Citi stock began in May 2007. On 11th May 2011, the stock price was $531, which fell to $10 by March 2009, which comes to about 98% downside from the price of 2007. The downfall was so horrible, that it forced Citigroup management to take some stern measures. The reverse split of 2011 was such a measure.
The reverse split took the share price from $4 to greater than $40 in a day, but investors did not gain a penny. It reduced the outstanding shares by a factor of 10 to facilitate the share price to multiply by 10. The move was initiated to get away with the image of penny stock imposed on Citi stock for more than a year.
Retail investors feel uncomfortable with both, share prices above $500 and lower than $10. The lower share price did attract the speculators but did not attract retail investors. Citigroup was the heaviest traded stock in 2010 contributing about 6.8% of the total trading volume on the US stock exchange, but it was due to speculators’ trading and it was not meant for retail investors and especially not for institutional investors. Shareholding by institutional investors impacts the image of a company’s share and it does attract retail investors. it is seen that low price share attracts high-frequency traders, but institutional investors do not invest in shares with prices less than $10.
The impact of this CITI stock split was not great for Citigroup stock. The next day of the reverse split, the share price fell by $1.04 or about 2.3%. The split was also not great for longer-term even, as the share price fell from $45.2 in May 2011 to $26.47 in May 2012, which is about a 42% fall in a year. Citigroup was not the first stock to execute a reverse split, companies like American International Group Inc also initiated a reverse stock split, and the stock went down by 39% in the next year.
Citi Stock Split: Will Citigroup Announce Another Stock Split in Near Term Future?
Citi stock had a dismal performance since 2007. The stock fell from $531 to $10 and is still not out of the woods as it is trading at just $53.41 (as of 1.6.2022). In the last five years, the stock has given a negative return to the extent of -12.60%.
It is highly unlikely that management will approve another stock split in the near term future. The reason is, that a reverse split was done to make the price more sustainable over the longer time frame. The share price came at $45 post reverse split and is still hovering around that level even after 11 years of the act.
A forward split will make the reverse split meaningless and will take the share price back to $20s (considering a 2:1 stock split). Moreover, in the decade 1990, the forward split could be initiated for the share price range of $60, but post-2000, the topic of a stock split is completely ignored by the company’s management and a higher share price of about $100 looks more attractive.
The possibility of forwarding a split is very minute for Citigroup. Management may be again forced to go for a reverse stock split if the share price keeps falling in the coming years. It is high time that Citigroup should take back the lost glory both as a company and as a share on the US stock exchange.
Vineet Agarwal
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