That’s the recent price action in Citigroup.
Undoubtedly, the Pandit memo, which talked of Citi enjoying a great start to 2009, has played part in that move.
But so has a painfull short squeeze, as the Wall Street Journal explained on Thursday.
Hedge funds rushed in to buy preferred shares of Citigroup after the New York bank announced last month that it would convert preferred shares into common stock. The fast-money crowd hoped to scoop up a quick profit based on the attractive conversion terms being offered by Citigroup to preferred shareholders, including the government.
Now, though, the hedge funds are licking their wounds. The reason: Their strategy of buying Citigroup preferred shares while selling short the common stock backfired. Since March 5, the price of Citigroup common shares has tripled, including a 23% jump Wednesday that left the stock at $3.08 in 4 p.m. New York Stock Exchange composite trading.
Ok, so its not so its not Volkswagen/Porsche. But painful nonetheless.
Related Link:
Citi’s Rally Undermines Hedge Funds’ Trading Tack – WSJ.com
Congested Citi Jams the Short Sellers – WSJ.com