Will Citigroup (NYSE:C) Own a Larger Piece of Itself?

Now that the U.S. Treasury has announced it is going to sell the first batch of shares of Citigroup (NYSE:C), it does make you wonder how that will play out as far as Citigroup beginning to buy back shares in the company to show their confidence in themselves.

Although it would be surprising to see it happen immediately, Citigroup leadership does have a decision to make fairly soon, as the price of shares eventually will move up to the point where it’ll become very costly for the company to buy more shares in contrast to where they stand today.

And of course Citigroup must have enough cash flow to justify using their cash in that way, especially if it were to force them to put a hold on other potentially lucrative growth areas in order to do it.

One thing we all have to keep in mind with this is when Citigroup was a $50 stock, that was based on about half as many shares as the company has today, so it is heavily diluted. So for the price of the company to move up to where it was back then, it isn’t the $50 dollar a share price range we’re looking at, as it would be far more valuable if and when it reaches that level again.

Then the number of units has and is divesting itself of must be taken into account as well, which probably brings the potential share price of the company over the next two or three years (assuming it actually rebounds strongly) to about $12 a share, or maybe a little more than that.

There is also the question of the market overall, which while being heated up lately, can in no way sustain that, and there is very little in the data to show we’re going to experience much of a recovery at all, even though the media take the most positive result and focus on that to imply we’re moving out of recession into a sustainable recovery.

Leading back to the question, will Citigroup begin to buy-back shares? I think they’ll have to. Two things will determine when: the price of shares and the availability of enough cash flow to allow them to do it.

Citigroup is in a hard place with this because of the timing factor in relationship to if the share price surges for some reason, and may be forced to make a decision that may not be the best at the time.

They will either have to buy at a higher price or buy when they have less cash available than they would prefer to have. More than likely they’ll implement some type of buy-back program when the two are about as close together as they can reasonably be in the circumstances they face.

Citigroup will eventually own a bigger piece of itself, and it’s only a question of when they start to buy and how much they’ll have to pay based on what we talked about above.