Citi Sinks As Dubai Denies
Maurna Desmond, 03.06.08, 4:35 PM ET Dubai International Capital must’ve been misunderstood. On Thursday the firm said that, contrary to earlier reports, it has no privileged information about Citigroup and has no opinion about its current dire situation. This statement, however, directly contrasts words from the firm’s own chief, who earlier in the week reportedly said Citi will need a lot of outside cash just to get by. (See “Citi Hits New Lows” )
In a statement dated Wednesday, Dubai International Capital said it had “never expressed an opinion” on Citigroup’s “investment merits or financial condition.” The release also said that the investment firm had not “been privy to any nonpublic information” about the company and that Citigroup hadn’t approached the Dubai investment house looking for money. Despite this, the press release did not directly contest Tuesday’s fire-starting quote.
After a rough weak punctuated by a plunge Tuesday, Citigroup fell 83 cents, or 3.8%, to $21.32 during afternoon trading in New York. Citigroup’s stock has fallen 57.7% over the past year. Citigroup’s current share price is the lowest it has been since late 1998.
The press statement concluded by saying “Dubai International Capital maintains an ongoing relationship with Citi” and has “substantial respect” for it. The obvious question is how did the rumor begin and why it survived without challenge for so long in a near instantaneous news environment? The Dubai concern has not responded to a request for more information.
The report on Tuesday was that Sameer al-Ansari, chief executive of Dubai International Capital, had said at a private-equity conference that Citigroup is going to need much more capital from outside investors to weather hard times brought on by the subprime mortgage crisis. Dubai International Capital, which has invested in Citi competitor HSBC Holdings, is the private investment vehicle for Dubai’s ruler, Sheikh Mohammed bin Rashid al Maktoum.
In November, the Abu Dhabi Investment Authority sunk $7.5 billion into Citigroup, shoring up its capital after billions in losses related to subprime mortgages. (See “Citigroup’s Write-down Disaster”) This bought the United Arab Emirates’ sovereign wealth fund a 4.9% stake in the bank. (See “Abu Dhabi Pumping $7.5B Into Citi” and “Rich Countries Funding Big Banks”)
In January, Citigroup also sold $12.5 billion in stock to additional investors including the Kuwait Investment Authority and Prince Alwaleed Bin Talal Alsaud of Saudi Arabia. (See “Prosperity and Peace In The Middle East”)