CNBC's Gasparino: Lampert's Stake In Citigroup Has Investors Guessing
The market appears to love Eddie Lampert's investment in Citigroup. But no one except the famed hedge-fund manager or a coterie of his senior advisers has a clue what he really wants from the banking giant except a higher stock price.
As reported, RBS Partners, an affiliate of Lampert's ESL Investments, now holds more than $800 million of Citigroup stock, or a little more than 15 million shares. That puts Lampert among the top 50 investors in the stock, right behind former CEO Sanford Weill. News of Lampert's investment sent Citigroup shares soaring on Wednesday.
Lampert is considered a "value" investor with an activist bent, which means he searches for stocks he thinks should rise in value. And he isn't afraid to let management know when they're screwing up.
Several analysts and investors told CNBC that they don't expect Lampert to sit on the sidelines and allow Citigroup shares to flounder. The stock already has done little over the past five years, largely under the leadership of CEO Chuck Prince, who has resisted calls to break up the financial services giant as a way to spur growth.
"This guy (Lampert) is not a passive investor," said William Smith of Smith Asset Management, a frequent critic of Prince. "If nothing else, this puts a bulls eye on Prince."
But putting Lampert in the category of Carl Icahn, the activist investor who demands change through public airings of his gripes, would be to misread his record. Lampert squeezes management privately, and there's no indication that he's looking to squeeze Prince.
Though many investors think Prince has done a poor job running the company to date, Citigroup itself is wildly profitable. Prince's recent cost-cutting may be the jolt needed to get the stock moving again. Lampert may be simply buying Citigroup because he sees value in the current plan and the current leadership.
Eventually, it'll become clear where Lampert stands on current management. If the stock doesn't perform, Lampert may emerge as Prince's worse nightmare. He's someone whom Citigroup executives have feared for some time--a true activist who demands change at the top to get the company's stock moving again