GIC PROFITABLE CITIBANK INVESTMENT WAS BASED ON PURE LUCK, NOT SKILL!

Time to set the record straight on GIC’s Citi investment: it was pure luck.

In Jan 2008, GIC had invested US$6.88 billion in 7% convertible preferred securities with a conversion price of US$26.35, ie GIC saw value in Citi at US$26.35. But after only 14 months, Citi’s share price collapsed to below $1.

GIC was actually making its second biggest punt in history when global stock markets were in free fall: GIC thought it had picked bottom but the bottom fell out.

As its nightmare unfolded, the 7% dividend was unexpectedly halted in late 2008 and the US government had to intervene to prevent a financial crisis.

NYT ​
Facts:
– GIC had not anticipated Citi’s dramatic collapse.
– It had assumed US$26.35* was good value but till today, it is still 75% lower. (*US$263.50 after reverse share split)
– It had not expected US government to intervene.
– It had not expected the US$26.35 exercise price to be adjusted to $3.25.

In other words, all that has been happening till today wasn’t even factored into GIC’s investment plan in 2008!

The image below better explains GIC’s tikam-tikam ‘combined strategy’ in Citi.
markets.ft.com

GIC shouldn’t anyhow take credit when the profitable Citi investment was based on nothing but pure luck.

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