Citi Reaches Deal With Uncle Sam

Citigroup shares dived in pre-market trading on Friday after the bank confirmed that U.S. taxpayers would take on a bigger share of the bank as the U.S. government sought to bolster its capital.

Citigroup (nyse: C - news - people ) and the government have reached a deal to convert up to $25.0 billion in government-held preferred shares in the bank into common equity, the bank confirmed Friday. The deal would see the government's voting stake in Citigroup rise to as much as 36.0%, from the current level of 7.0%. This will be accompanied by an infusion of new members on the bank's board, giving it a majority of independent directors, the bank's chairman Richard Parsons said Friday.

Shares of Citigroup plunged 38.2%, or 94 cents, at $2.46, in pre-market trading Friday, suggesting investors feared further dilution of their shareholdings.