Citi preferred stock exchange brings big time dilution

Citigroup (C) shareholders have plenty of reasons to be unhappy. Few companies have been as badly damaged by the financial crisis as Citi, which posted some $27 billion in losses last year. Its stock plunged to near $1per share in March. And now it will exchange $58 billion in preferred stock for common equity, leaving shareholders with a fraction of their previous stake.

The move will leave Citi "among the best capitalized banks in the world," CEO Vikram Pandit said in a statement today. It will also make the U.S. government the biggest owner of its stock, with 34 percent.