Citigroup (C) said Wednesday that it will pay $590 million to settle a class-action lawsuit with investors who bought Citi stock from late February 2007 through mid-April 2008.
Plaintiffs in the lawsuit accused Citi of misleading them through misstatements and omissions in the company’s disclosures with regard to its exposure to subprime debt and assets tied to such debt.
Citigroup, however, denies the allegations and says it is entering into the settlement to “eliminate the uncertainties, burden and expense of further protracted litigation.” It intends to pay for the settlement with existing litigation reserves.
“Citi will be pleased to put this matter behind us,” the company said in a press release shared with AdvisorOne. “This settlement is a significant step toward resolving our exposure to claims arising from the period of the financial crisis.”
Meanwhile, experts say, this may be good news for the company but isn’t enough compensation for shareholders.
“The decision made by Citigroup CEO Vikram Pandit to ‘put the pain from the financial crisis behind it’ resembles the earlier decision by Goldman Sachs to settle for a fine instead of long legal battles,” said John Alan James, executive director of the Center for Global Governance, Reporting and Regulation at Pace University, in a statement. “It could seem too little and too late for Citi shareholders who have seen the value of Citi shares plunge by over $173 billion.”
Citi’s shares are trading at around $29.60, which is down about 80% from late 2007 and roughly 10% for the past six months.