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Citigroup Sold by Hedge Funds Eton Park, Viking as Banking Revenue Slumps

Date: Tuesday, May 17, 2011
Author: Dakin Campbell, Bloomberg

Eton Park Capital Management LP and Viking Global Investors LP were among at least five hedge funds that exited their Citigroup Inc. (C) stakes in the first quarter as investors shied away from U.S. banks facing revenue declines.

Eton Park, the hedge fund run by Eric Mindich, sold 80.5 million shares in the quarter and Viking, co-founded by Andreas Halvorsen, liquidated its holding of 151 million shares, according to filings yesterday with the U.S. Securities and Exchange Commission. The stakes were valued at $381 million and $714 million, respectively, at the end of last year.

The firms eliminated their holdings before Citigroup imposed a 1-for-10 reverse stock split earlier this month. Chief Executive Officer Vikram Pandit, 54, announced the split in March as a way to make the bank’s shares more attractive to investors. The two funds were joined by Tudor Investment Corp., AQR Capital Management LLC and Daniel Loeb’s Third Point LLC in cutting their investments in the New York-based lender.

Citigroup fell 6.6 percent in the first quarter after surging 43 percent last year, compared with a 22 percent gain for the 24-company KBW Bank Index. (BKX) Yesterday, Citigroup dropped 34 cents to $41.19 on the New York Stock Exchange.

Tudor, the $11.5 billion hedge fund founded by Paul Tudor Jones and based in Greenwich, Connecticut, sold 3.94 million shares in the quarter, according to a regulatory filing. AQR, the fund run by Clifford Asness, disposed of 11.3 million shares, while Third Point sold all of its 7 million, according to a filing.

Appaloosa, Lone Pine

Other investors pared their Citigroup holdings without exiting their investments completely. Moore Capital Management LP, the $15 billion hedge fund run by Louis Moore Bacon, sold 35.2 million shares in the first quarter, while Appaloosa Management LP shed 40.9 million shares, filings show. Lone Pine Capital LLC, the hedge fund run by Stephen F. Mandel Jr., disposed of 51.7 million shares.

Citigroup said March 21 that it would resume paying a dividend of 1 cent a share in the second quarter after the reverse stock split. The first day of trading after the split was May 9. Jon Diat, a bank spokesman, declined to comment.

First-quarter profit dropped 32 percent to $3 billion from $4.43 billion in the same period last year, Citigroup said in an April 18 statement. Revenue declined 22 percent to $19.7 billion, the company said. Net revenue at the six largest U.S. lenders, including Citigroup, fell 13.3 percent in the first quarter from a year earlier, according to Bloomberg data.

U.S. Bailout

Also in the first quarter, Eton Park purchased 107.7 million Citigroup warrants expiring in January 2019 that convey the right to buy common stock at $106.10, and another 34.5 million warrants expiring October 2018 with a strike price of $178.50. The warrants were given to taxpayers as part of the bank’s $45 billion U.S. bailout, and auctioned off by the government in January.

Other investors, including billionaire George Soros, increased their Citigroup stakes. Soros Fund Management LLC bought 18.7 million shares, Highbridge Capital Management LLC added 21.9 million and Bruce Berkowitz’s Fairholme Capital Management LLC purchased 21.3 million, filings show.

Kingdon Capital Management LLC, the hedge fund founded by Mark Kingdon, took an initial stake of 17.5 million shares valued at $77.4 million as of March 31.

Separately, Wellington Management Co. added to its holdings of New York-based JPMorgan Chase & Co. (JPM) in the first quarter, and sold 5.5 million shares of Goldman Sachs Group Inc. (GS), according to a regulatory filing. Wellington’s stake of 89.7 million shares in JPMorgan was valued at $4.13 billion as of March 31.

Money managers overseeing more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net