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Reverse Stock Split Fails To Ignite Citi

If you’ve been playing Citi on the hopes that the reverse stock split would attract institutional money, you’re probably not too happy.

Citi closed lower on Monday after its 1-10 reversal went into effect.

The bullish theory was that after reverse split, funds prohibited from buying the stock under $5, would no longer be subject to that restriction. (The split took the stock to about $50)

Well, maybe the big money could buy, but they didn’t. And the odds aren’t particularly good that shares will bounce anytime over the next month.

Data from Birinyi Associates which examines the Russell 1000 stocks that have enacted a reverse split since 1990 have suffered an average stock price decline of 1.6 percent 30 days after the split. Those who have done this in the last 10 years have lost nearly 6 percent in the first 30 days.

For larger companies such as Citi, the odds are a little better, though they often take a short-term hit, says Reuters.

Sounds discouraging. But Ed Najarian, ISI senior managing director, thinks the pullback is an opportunity.

"To the extent that the reverse stock split causes the stock to go down in the short term, that would be a buying opportunity," he says.

Get all the details. Watch the video now!



* our conversation with Ed Najarian begins about 6 minutes into this clip.





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Trader disclosure: On May 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Finerman and Finerman's firm own (AAPL); Finerman and Finerman's firm own (BP); Finerman owns (C); Finreman and Finerman's firm own (CVS); Finerman's firm owns (IBM); Finerman's firm owns (JPM) and is long (JPM) leaps; Finerman owns (JPM); Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (UNG); Finerman owns (USO); Finerman's firm is short (IWM), (SPY), (MDY); Finerman's firm owns s&p puts; Finerman's firm owns Russel 200 puts; Terranova owns (XOM); Terranova owns (BAX); Terranova owns (SLV); Terranova owns (TCK); Terranova owns (APA); Terranova owns (HOC); Terranova owns (OXY); Terranova owns (UPL); Terranova owns (FCX); Terranova owns (BX); Terranova owns (V); Terranova owns (VRTS); Terranova owns (JPM); Terranova is short (NFLX); Terranova is short S&P Futures; Cortes owns (EXC); Cortes owns (SO); Cortes owns (TGT); Cortes owns (K); Cortes owns (KFT); Cortes is short Nasdaq futures; Cortes is short EEM vs S&P long; Cortes is short EUR vs USD and CHF; Seymour owns (AA); Seymour owns (AAPL); Seymour owns (F); Seymour owns (POT); Seymour owns (SLW)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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For Ed Najarian
ISI does and seeks to do business with BAC, C, WFC
ISI research analysts received non-investment banking compensation from a major bank in the past 12-months

For Mike Khouw
**No Disclosures

CNBC.com with wires.