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.

Under the plan, Citi will issue some 18 billion new shares of common stock. That's more than three times the number of shares trading before the exchange, according to Citi's regulatory filings. Current shareholders will own about 20 percent of the company, according to calculations by The New York Times' DealBook blog.

The Treasury Department will convert $25 billion of the preferred stock it bought from Citi through the Troubled Asset Relief Program, with private investors contribuing the rest.

Regulators' stress tests of bank balance sheets, completed last month, found Citi in need of $5.5 billion in additional capital. Today's exchange was expanded to cover that amount.

Despite reports that the Federal Deposit Insurance Corp., one of Citi's regulators, was pushing for Pandit's removal last week, the company said a delay in getting the exchange off the ground had nothing to do with interference from Washington. News reports suggesting as much were "entirely inaccurate," it said in a statement earlier this week.

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