Wednesday, December 16, 2009

Abu Dhabi Wants Its $7.5 Billion Back

Back in the day when it seemed like a great idea to pay over $30 a share for Citigroup, Abu Dhabi struck a deal with the bloated investment bank to pump billions of dollars into the bank. At the time, Citi needed the cash, and Abu Dhabi was looking for a sure thing. The sovereign wealth fund invested in Citi in November 2007, in return for an 11% dividend until March of 2010. Doesn't sound like a horrible investment so far, right? Alas, part of the deal was for Abu Dhabi to begin buying $7.5 billion in Citi shares at $31.83 each. I'm certain I don't have to remind readers of the sad fact that Citi's shares are currently trading at around $3 and change. The good news is that this makes the folks at Citi look like maybe they weren't the biggest bunch of bumbling idiots in the sea of financial idiocy of the past couple of years. The bad news is that Abu Dhabi is pissed and no longer wants to honor the contract. You see, the thing is, it has to fork over $10 billion or so to prop up Dubai World, so it kind of needs the cash.

Abu Dhabi is insisting that Citigroup scrap the deal entirely, or pay $4 billion in damages if the deal is upheld on account of some "fraudulent misrepresentations" it claims Citi made. I'm not sure exactly what those representations were. Mismarking assets? Accounting fraud? Who knows? But I'm fairly certain than anyone who paid over $30 for Citi in 2007 suffered from the same misrepresentations. Maybe some enterprising lawyer can pick up Abu Dhabi's case and turn it into a class action lawsuit.

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