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Citi Stock Offering 'Terrible Error,' says Bove

In the after hours, the Fast Money traders were among the large number of investors anticipating Citigroup's $20 billion secondary offering.

But if you're looking to buy, analyst Dick Bove of Rochdale thinks you're playing it all wrong.

He tells the desk, the secondary "is a terrible deal for shareholders, Vikram Pandit should have never done this thing."

Not only does Bove feel the secondary provides "no positives for shareholders" but he interprets the move to mean the interests of Citi's management team are not aligned with those of shareholders. He thinks its more about getting away from government pay restrictions than anything else.

"I put a 'sell' on this stock when I couldn't convince them not to do this deal," reveals Bove. "Three weeks ago I met with the company and talked with them about not going forward with a deal of this nature. "My view was that this was a terrible error."

"I told them wait 2 years. Let the earnings come back to the company; let the business come back - then think about getting rid of the government obligations," he says.

But they didn't. And that's turned Bove from a Citi bull into one of the most bearish analysts out there.

"The net effect is I don't want to own this stock. I don't want to own a stock in a company that's not focussed on business issues and instead focussed on financial issues. I don't want to own this stock and I would not buy it."

* And in case you're looking for a trade elsewhere in the sector, Bove adds "the two stocks really screaming to be bought are Goldman Sachs and Morgan Stanley ."

"Everybody is having a fit that trading activity has weakened in the 4th quarter," he says. "But it's seasonal. Nobody puts money to work in December and the net effect is a seasonal decline in trading and people are selling (Morgan and Goldman) for that reason."

"But in the first quarter hedge funds come back into the market and money will come into long only funds from pension contributions and you're going to have to start trading again aggressively."

"In the month of January I think we see a surge in trading activity to reflect that fact -- Everybody is looking at the wrong number. They shouldn't be looking at the Q4 (trading volume) which is seasonally weak. They should be looking at the Q1 (trading volume)."


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