The U.S. government decided not to sell because it would have realized a loss in the shares, but still plans to sell its 7.7 billion shares in the bank within the next year, a person familiar with the matter said.
Citigroup said on Monday that the government would sell up to $5 billion of shares alongside the bank.
Citigroup said Monday it is raising capital to repay $20 billion to the U.S. government. In addition to selling about $20 billion of stock and convertible securities, the bank said it plans to issue $1.7 billion of shares to employees, and may sell another $3 billion of trust preferred securities in the first quarter.
A $3.15 sale price is about 20 percent below Citigroup's closing share price on Friday, before the bank announced the deal early on Monday.
Citigroup's sale was likely hampered by Wells Fargo & Co, which sold about $12.25 billion of shares on Tuesday, analysts said. Wells Fargo's shares sold at a 2 percent discount compared with their closing price before the bank announced its issuance plans late Monday.
There are so many big share sales this week that investors are more selective, said Joe Plevelich, an equity research analyst at Schneider Capital Management in Wayne, Pennsylvania.
If Citi had been the only bank to price this week, there might have been more interest, he added.
(Reporting by Dan Wilchins and Elinor Comlay; editing by Andre Grenon)