Friday, May 18, 2007

Investor Action At Citi

This weeks' announcement that hedge fund investor Eddie Lampert has bought more than 15 million shares of Citi seem to have finally triggered an explicit sense that the end is near for CEO Chuck Prince.

While the company has been languishing under Prince for years, as my various posts (search on the label "Citigroup" for my prior posts) have noted, Lampert's arrival is thought by many to signal that there will soon be action, one way or another.

True, Lampert isn't the largest stockholder in Citi, by far. However, after his radical moves resulting in the takeover of KMart and Sears, nobody seems to think he'll sit still while the stock continues to tread water.

Interestingly, some wags are just now suggesting that the real culprit in all of this is Chairman Bob Rubin. He is alleged by some to have been fiddling around, globally glad-handing while Prince has mismanaged the firm. Thus, a corporate governance issue has been raised, asking why Rubin, as the board's senior guy on station, hasn't done more to move Prince to action, or just remove him.

Either way, the 4% rise in Citi shares on Wednesday, following word of Lampert's investment, would seem to indicate that others are now piling on, in hopes of some value-releasing activity in the near future.

I say it's more than about time. Ideally, Citi needs to be split up into more easily led and managed, standalone units which may more nimbly respond to market and competitive forces in their particular financial service sectors. As a financial supertanker, Citi has proven unmanageable in a manner that performs consistently better than the markt for its owners. Can it really do worse as a number of smaller, more responsive entities?

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