The law of unintended stock bonus payment consequences strikes and this time it is truly hilarious. Turns out Citi will seek shareholder approval to issue 40 million new shares to cover employee compensation. Per the WSJ, as Citi's stock has plummeted for one reason or another, the total bonus amount has to be satisfied with many more shares. At today's closing price the 40 million shares would translate into roughly $120 million in stock comp. While this will not dilute the pro forma 21.5 billion shares outstanding after the preferred exchange, we will likely be seeing many more of these going forward. And indeed, Morgan Stanley is also said to be seeking the same kind of approval.
Now, one wonders, what happens if shareholders, already angry beyond measure from dilution after dilution, disapprove of this new issuance - does that mean that staffers at both companies will be paid in oreo cookies, good will and toilet paper? Just a thought...
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