Would it be best, or just easiest for Citigroup (C) to break up?
Cohen makes the point that the concept cannot succeed. Perhaps a plan like the one UBS (UBS) is going to attempt. The problem with breaking up in a down market is that you will get a small fraction of the true worth of the assets you are selling.
Pandit’s current plan to gradually sell of smaller, insignificant assets is the preferred way as it maximizes the value shareholders get for the assets that are sold. While it may take a while for the “worm to turn” so to speak, the end product will be better and stronger.
Cohen does in a way contradict himself when he says that JP Morgan (JPM) is making the supermarket concept work, but Citi has not been able to. Well, if that is true than it is a management issue, not a model one. If that is true, then why rush to break it up before Pandit is given a chance to fix it?
If he can, the shareholders win big, if not, then he can sell assets later at better prices, shareholders win.
The rush to break it up seems a bit short sighted at this point…
Disclosure (“none” means no position):Long C, None
