Citigroup Inc. announced plans to seek shareholder approval to both increase the number of shares outstanding and undertake reverse stock split as part of the company's effort to exchange common stock for preferred securities.

The embattled financial-services giant said last month it would offer to convert as much as $27.5 billion in preferred stock not held by the federal governemnt to common stock, with the U.S. agreeing to match up to $25 billion of the conversions in the latest effort to keep the banking giant afloat.

Assuming the maximum amount of the conversions are made, existing common shareholders would see their holdings diluted by nearly 75%, with the government becoming the largest holder at 36%.

Citi said Thursday that all private holders of convertible preferred securities, with a total liquidation value of about $12.5 billion, have agreed to the stock swap. Holders of non-converitble preferred shares are also eligible for the offer. The conversion rate for swapping the preferred securities to common shares is $3.25. That was a 32% premiumm to the prior day's closing price when the offer was unveiled three weeks ago.

The stock, down 54% this year, has more than tripled in the past two weeks amid a short squeeze after the stock plunged in the wake of the stock-exchange plan. Hedge funds have been covering their shorts in recent days amid concern that the stock exchange's terms might change.

After being up more than 10% earlier, shares were flat at $3.08 in recent premarket trading.

There are currently some 5.5 billion shares outstanding, a number which would grow substantially after the stock exchange. As such, a reverse split would both reduce that number and increase the value of each share.

Citi said in a filing with the Securities and Exchange Commission it will seek approval for seven different reserve-split ratios from 1-for 2 to 1-for-30.

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