GIC say 'Yes' to Citi

A few days ago I reap praise on Government of Singapore Investment Corp (GIC) for saying ‘No’ to Citigroup; I said it too soon.

I cannot believe that GIC have agreed to convert all their preferred shares in Citigroup into common stock. Now the price of US$3.25 is far below the originally agreed conversion price of $26.35 a share, but there’s a few thing we must consider:

1) Citi’s closing price on Thursday is at US$2.46 a share!
2) By converting, GIC will lose the 7% annual dividend that it has been receiving if it chose not to convert its holdings.
3) based on Thursday’s closing price of US$2.46 for Citi shares, GIC will now suffer a US$1.67 billion loss
4) data clearly show that the U.S. recession is going to get worse before it get any better with the U.S. economy shrinking more than expected in the fourth quarter of 2008
5) U.S. government has just taken a 36% stake in Citigroup (I don’t care if the Americans don’t want to admit it, that’s a nationalization of a bank)
6) GIC is now the second-biggest shareholder in Citi with a stake of about 11%, and Citi’s shares plunged 37% to US$1.55 at the start of US trading on Friday after the bank’s announcement. GIC is paying US$3.25; the current price is US$1.55. Do the math!
7) The profitability of all US banks is likely to be impaired in the next two years’ and Citi is still in danger

Now if Citigroup is still a viable entity, there will be no need for much a dramatic effort by the U.S. government to prop it up. GIC is making a loss investing in an ailing bank in a weak market with poor economic outlook on the horizon. After all this, can someone from GIC please come out and explain why in the bloody world they will do the conversion.

Comics this week

Reign in Hell #8- Reign in Hell remind me of one of those movies who is good, maybe even great, and then it all fall apart in the last 10mins. Usually this is because the directors of the movie went out of the way to get a happy ending. Sometimes it’s because they went out of their way to get a final twist into the story. That’s what happens here. A good mini-series which was destroyed by being too clever for its own good. After all the fighting between Satanus and Neron, after all the talk about nothing happens in hell without him knowing, Lady Blaze won the throne like that? Satanus was betrayed by failing to see her reaching out an arm? It’s actually funny; unfortunately Reign in Hell isn’t a comedy. Too bad, this series could have being great.

Nova #22- The dispute between Richard Rider and Worldmind escalate as Rider try to find out why the supercomputer is acting so weird. It was a good explanation and this issue gives me hope that last issue was nothing but a fluke. The upcoming War of Kings is a concern as I fear the Corps was rebuilt just so that it could be destroyed again, and I don’t want that. But I’ll be here to see what will happen next issue. That’s never a bad thing.

Avengers: The Initiative #22- With Dark Reign on, many fans wonder if A:TI will be pushed to the back of the pile of many readers. I hope not because A:TI is still an excellent series. Ragnarok, the clone of Thor from Civil War, is a perfect of why a series like A:TI is needed. The series is a platform for all those little-known or plain forgotten characters in the Marvel U. I’ve almost forgotten MVP’s body was still in the basement of Camp Hammond and I like the fact that A:TI is trying up the loose ends of the series.

Suicide Squad?

Movies based on comic books has been a great source of hits these past few years. The success of these movies has being pretty uneven. The big hit last year was DC Comics' and Warner Brothers “The Dark Knight”, but for every “The Dark Knight” there’s an Incredible Hulk.

However the success of movie franchises make studio willing to do these movies. The list of upcoming comic’s movies is pretty long. To my knowledge there’s Watchmen (opening next month, watch for my review here), Sin City 2, Wolverine, Iron Man 2, Thor, Supermax (a Green Arrow movie). These are the certainties. Possible comic’s movies in development include X-Men: First Class, Spiderman 4, Captain America, Green Lantern, a new Batman movie (almost a certainty), a new Superman movie, even a Youngblood movie.

So movies based on comic books are hot. So hot that I am wondering if it’s too much of a good thing. I think this when I heard that "Suicide Squad" is on its way to a movie reincarnation. Suicide Squad is a team of super villains who are given a shot at freedom by the government if they managed to complete a mission that will most likely kill them. A suicide mission thus the name of the team. Think the “Dirty Dozen” with superpowers.

A good interesting concept but why is Warner working on a film adaptation of it? "Suicide Squad" was never that popular to begin with. Even in it’s heydays in the 80’s and 90’s, it was a mid level book sale wise…at best.

I will admit I will be interested to see DC villains like Deadshot at work, but I hope Hollywood will not kill the goose laying the golden eggs. Overexposure can kill any genre.

Good Decision to Walk Away

With Citigroup insolvent and in need of more cash infusions, they have been asking their investors to convert their preferred Citigroup shares into common stocks. Reports from America say that the Government of Singapore Investment Corp (GIC) will say no.

GIC is refusing to convert their preferred Citigroup shares into common stock and the reason is simple. It’s not a good deal.

Based on the terms of the initial purchase, GIC must convert at a 20% premium above the reference price, which is based on the average Citi share price in the days following the initial announcement on Jan 15, 2008. That reference price comes out to US$26, so that means that if GIC want to convert their shares into common stocks, they must pay over US$31 a share. Citi's current price is at US$2.14 on Monday.

GIC will want to keep its US$6.88 billion investment in the US bank, but chances are that Citi will reaches some kind of agreement with US officials that includes a greater government role. Let call it what it is; the nationalisation of Citibank. If the US government does that (and most believe they will have to for Citigroup to survive), this will lead to a dilution of GIC's stake.

With such dangers, I fully support GIC’s decision not to do the conversion. Paying US$31 a share when the price on the market is just above US$2 is nonsense. Walk away from the investment if they have to, but let’s not be taken for a ride. Good decision!

Brace for Tough Times...and then?

Prime Minister Lee Hsien Loong asked Singaporeans to brace for tough times. The PM says that Singapore’s economy will contract between 2 to 5% as Singapore’s export markets are all suffering from recession.

All good and fine, but I want to know what strategy the Singapore government has to get ourselves out of this quagmire. Everywhere else in the world, countries are implanting ways to bring their economy out of trouble. The Obama Administration in the U.S has a trillion dollars stimulus package, the Chinese government lend money to their SMEs (small-medium enterprise), and even our neighbour Indonesia has a plan to focus on their raw materials as an engine of growth. Singapore’s plan however seems to consist of praying for the U.S economy to turn around.

Like other export-reliant Asian economies, Singapore has been hard hit by the collapse in consumer demand as economies slow sharply around the world. Just look at the waters to the south of our island and you will see container ships and tankers just parked there. It’s all fine and well for our PM to say that times would be tough for Singapore and Singaporeans need to bunker down, but I would feel much more comfortable if they can come up with a strategy that consist of more than praying for other countries to do the work for them.

The Curious Case of American Words & Terms

Just last week, I heard that the Obama Administration shouting loud and clear that there will NOT be any nationalisation of any American bank.

Today is Monday, and I read that the U.S. government could end up owning as much as 40 percent of Citigroup. This might be of some relief to investors, but I have to ask, “How is owning 40% of a bank NOT nationalization of the bank?”

I know America hate the term but surely if you own 40% of a bank, that means the bank has been nationalized already. I mean that’s like calling mercenaries “private contractors”. Wait this is America I am talking about, forget I said anything.

Comics this week

Guardians of the Galaxy #10- The gurus of the Marvel cosmic universe, Dan Abnett and Andy Lanning, have a lot to keep up with in Guardians of the Galaxy. The current team met up with Starlord finally and rescue both him and Jack Flagg from the over-run 42 prison. The story of Adam Warlock and the Universal Church of Truth is interesting but with the team spilt all over the place, Phyla-Vell and Drax were MIA this issue. Inevitable considering how many threads there are ongoing, but there's no rush job on the art this issue. Hopefully this is something they can keep up.

Stormwatch #19- Stormwatch and the Authority fight to save the Carrier, and Jackson King finally get to show why he is considered one of the most powerful people on Earth. He seems more powerful than I remember but that's good. Stormwatch need all the help they can get and between him and Winter, Stormwatch has 2 powerhouses. The back-story in this issue was a highlight for me. Usually I find it pretty interesting to know what happen to some of the minor characters in the Wildstorm world, and I have always like Max Faraday. His powers are pretty interesting. Like to see him and Tao go at it.

Street Fighter IV #1- I collect this because it is a first issue and I always like to give them a chance to impress me. Udon did a smart move in this issue; the story evolves around the new fighters in the Street Fighter universe. No Ryu, Ken or Chun Li here, the story is on Abel and the double agent Crimson Viper. With a new game and new characters, I think having stories on the newer characters (as opposed to another telling of the main characters) is a smart move. Pretty impressive #1 really.