Facebook Inc. (NASDAQ:FB) has not made investors very much money since its IPO in May. The stock has basically fallen virtually every week, and Friday it reached a new low. There may be some investors who have taken pretty sizable losses on the stock, but now Citigroup Inc. (NYSE:C) has opened up an opportunity for investors to make money on Facebook, without actually investing in it.
Citigroup Inc. (NYSE:C) announced that it has created $1.1 million of auto-callable bonds linked to the stock price of Facebook, Inc. (NASDAQ:FB). So even when someone isn’t actually invested in Facebook, it can make money when the stock is doing well.
Here is how it works: An investor pays $1,000 for each security, and Citigroup Inc. (NYSE:C) pays a 17 percent coupon per year, paid quarterly. Each quarter, Citigroup would check the price of Facebook Inc. (NASDAQ:FB) shares. If the stock has risen above $19.34 a share (the closing price this past Tuesday), the investor gets principal returned plus the coupon. If the price remains below that mark, the investor gets the coupon but the note is not called. However, there is a floor; if Facebook Inc. (NASDAQ:FB) shares drop below $12.57 on one of the quarterly observation dates, the investor gets the coupon but the bond is exchanged for the lower-value Facebook shares or equivalents in cash.
A spokesman for Citigroup Inc. (NYSE:C) said, however, the note is a custom product created for a single investor. But similar products exist that are tied to single companies like Amazon.com Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL). Certainly George Soros of Soros Fund Management is interested in making some money on Facebook Inc. (NASDAQ:FB) stock as an investor in the stock itself, rather than the bonds from Citigroup Inc. (NYSE:C).