Citigroup Issues Callable Contingent Coupon Notes Linked to Russell 2000, S&P 500, and Regional Banking ETF

Security Structure and Underlying Index Mechanics

The securities issued by Citigroup Global Markets Holdings Inc. are unsecured debt obligations fully guaranteed by Citigroup Inc., structured to track three distinct equity market indices simultaneously. The three underlyings are the Russell 2000 Index, the S&P 500 Index, and the State Street SPDR S&P Regional Banking ETF. Rather than providing straightforward exposure to any single index, these securities determine their coupon and principal payments based on the performance of whichever underlying performs worst relative to its initial value on each valuation date. This mechanism creates negative correlation benefits for the issuer but concentrates downside risk for investors into a single worst-performing component.

The disclosure establishes that each contingent coupon payment requires the worst-performing underlying to maintain a closing value equal to or greater than 65% of its initial underlying value on the relevant valuation date. The initial underlying values are set as closing prices on the pricing date of August 3, 2026, though these specific values were not disclosed in the preliminary pricing update. If the worst performer falls below this 65% coupon barrier at any scheduled valuation date, investors receive no contingent coupon payment on the following payment date. This structure means that a significant decline in any single underlying eliminates income for all investors until that underlying recovers above the barrier threshold.

Contingent Coupon Payment Framework and Schedule

Investors receive contingent coupon payments of 2.625% of the stated principal amount ($1,000) on each of eight scheduled contingent coupon payment dates, provided that the worst-performing underlying has closed at or above its coupon barrier value on the immediately preceding valuation date. The contingent coupon payment dates occur on the third business day following each valuation date, with valuation dates scheduled for November 3, 2026, February 3, 2027, May 3, 2027, August 3, 2027, November 3, 2027, February 3, 2028, May 3, 2028, and the final valuation date of August 3, 2028. Over the approximately two-year holding period, if all contingent coupons are paid, the annualized coupon rate would be 10.50%, significantly higher than conventional Citigroup debt of equivalent maturity.

The pricing update emphasizes that investors must accept the risk of receiving no contingent coupon payments if the worst performer falls below the 65% barrier, making the actual yield potentially much lower than the advertised annualized rate. The final contingent coupon payment, if applicable, coincides with the maturity date of August 8, 2028. Investors have no downside protection if equity markets experience sharp declines, and the filing makes clear that the higher coupon potential explicitly compensates for the absence of conventional interest payments and the equity downside exposure embedded in the structure.

Principal Repayment at Maturity and Barrier Structure

At maturity on August 8, 2028, assuming the securities have not been called for redemption, investors will receive either par value of $1,000 or a substantially reduced amount depending on the final underlying value of the worst-performing underlying on the final valuation date of August 3, 2028. If the worst performer closes at or above its final barrier value of 65% of its initial underlying value, investors receive the full $1,000 stated principal amount. However, if the worst performer's final underlying value falls below 65% of its initial value, investors receive $1,000 plus the underlying return (expressed as a percentage) times $1,000, which could result in substantially less than par or potentially zero repayment.

The disclosure explicitly states that investors may receive "significantly less than the stated principal amount of your securities, and may be zero" at maturity if the worst performer declines more than 35% from its initial value. This downside exposure is unlimited in severity—if the worst underlying loses 50% of its value, investors would receive only $500 per security; if it loses 100%, investors receive nothing. The final barrier value is identical to the coupon barrier value at 65% of initial value, meaning that failure to meet the coupon barrier on the final valuation date also triggers principal write-down at maturity. Investors receive no protection from dividends paid by the underlying indices and gain no appreciation from index outperformance above par value.

Pricing, Underwriting Economics, and Estimated Value Discount

The securities are issued at $1,000 per security, with Citigroup Global Markets Inc. receiving an underwriting fee of $18.50 per security, leaving net proceeds to the issuer of $981.50 per security. The filing discloses that Citigroup Global Markets Holdings Inc. estimates the value of the securities on the pricing date at August 3, 2026, will be at least $916.50 per security, creating an immediate discount to issue price of $83.50 or approximately 8.35%. This estimated value is based on Citigroup's proprietary pricing models and internal funding rates and is not an indication of the price at which the underwriter or any other party would be willing to purchase the securities in the secondary market after issuance.

From the $18.50 underwriting fee, Citigroup Global Markets Inc. pays selected non-affiliated dealers a selling concession of $17.50 per security and a structuring fee of up to $1.00 per security. The filing also notes that Citigroup and its affiliates may profit from expected hedging activity related to the offering, independent of whether the value of the securities declines after issuance. Electronic platform providers may receive additional fees for each security sold through their systems where dealers or custodians utilize such platforms. The combination of the estimated value discount and the underwriting fee structure reflects the complexity and embedded risks of the structured product.

Redemption Rights and Potential Redemption Dates

Citigroup Global Markets Holdings Inc. retains the right to call the securities for mandatory redemption on any of six potential redemption dates, with not less than three business days' notice required before redemption. The potential redemption dates correspond to the contingent coupon payment dates related to valuation dates scheduled for February 3, 2027, May 3, 2027, August 3, 2027, November 3, 2027, February 3, 2028, and May 3, 2028. If Citigroup exercises its call right on any of these dates, investors receive $1,000 plus any applicable contingent coupon payment on that redemption date, with redemption occurring in whole and not in part.

The redemption feature provides Citigroup with flexibility to exit the position early if market conditions become unfavorable or if hedging costs decline. Investors have no corresponding put right and cannot redeem the securities prior to maturity. The ability to redeem at par plus accrued contingent coupons means that Citigroup benefits from any decline in the value of the securities below par, effectively capping investor gains while preserving the full downside exposure. Early redemption is particularly advantageous to the issuer if underlying indices perform strongly, reducing the issuer's hedging costs while allowing redemption at fixed $1,000 par value.

Risk Profile and Worst Performer Methodology

The securities expose investors to the performance of all three underlyings simultaneously, but with asymmetric impact based on the worst performer mechanism. An investor holding these securities experiences negative exposure to any sharp decline in the Russell 2000 Index, the S&P 500 Index, or the Regional Banking ETF—even if the other two indices perform strongly. The worst-performing underlying is determined on each valuation date as the underlying with the lowest underlying return, calculated as (closing value minus initial value) divided by initial value. This means that a 35% decline in any single underlying triggers the loss of contingent coupon payments and principal write-down, regardless of the performance of the other two underlyings.

The disclosure emphasizes that investors receive no dividend income from the underlying indices and cannot participate in any appreciation above the stated principal amount. An investor gains no benefit if all three indices triple in value by maturity; the investor receives $1,000 and all contingent coupons assuming minimum coupon barrier levels are met. However, if the worst performer declines 40%, the investor receives $600 at maturity, even if the other two indices appreciate substantially. This structure transfers equity market volatility to debt investors while capping investor upside and protecting the issuer from unlimited principal appreciation liability.

Liquidity Constraints and Secondary Market Considerations

The pricing update discloses that the securities will not be listed on any securities exchange, creating limited or no liquidity for investors who wish to sell prior to maturity. The filing states explicitly that investors must be willing to accept an investment that may have limited or no liquidity, acknowledging that secondary market trading may be difficult or impossible. While Citigroup Global Markets Inc. may make prices at which it is willing to trade the securities, it has no obligation to do so, and any secondary market purchase price would likely differ substantially from par or the estimated value at issuance.

The illiquidity constraint means investors are effectively locked into a two-year holding period with no practical ability to exit if market conditions change or if investors' risk tolerance shifts. This illiquidity discount is not separately quantified in the preliminary pricing update but is factored into the estimated value of $916.50 per security. Investors seeking to liquidate prior to maturity would face wide bid-ask spreads and potential significant losses. The lack of listing on any exchange further limits transparency and price discovery, making it difficult for investors to assess fair value at any point during the holding period.

Credit Risk and Guarantee Structure

All payments due on the securities are fully and unconditionally guaranteed by Citigroup Inc., creating credit exposure to the parent holding company. The securities themselves are issued by Citigroup Global Markets Holdings Inc., a wholly owned subsidiary of Citigroup Inc., which is an unsecured obligation of that subsidiary. If Citigroup Global Markets Holdings Inc. defaults on its obligations, investors would have claims against Citigroup Inc. through the guarantee, but investors remain subject to the credit risk of both entities. The filing does not provide credit ratings, recent financial metrics, or capital adequacy information for either Citigroup entity.

The guarantee does not extend to any third party or hedge counterparty, and it does not provide protection from changes in credit spreads for Citigroup debt. If market perception of Citigroup's creditworthiness deteriorates, the value of the securities would decline due to credit spread widening, even if the underlying equity indices perform well. Investors are exposed to idiosyncratic risk of the Citigroup franchise separate from the equity index performance risk embedded in the security structure. The filing notes that the securities are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

Valuation Framework and Pricing Date Details

The pricing date for the securities is August 3, 2026, at which point the initial underlying values for each of the three indices will be established based on closing prices on that date. The preliminary pricing update does not provide the specific closing prices or initial underlying values, stating only that these values will be determined on the pricing date. The issue date is August 6, 2026, three business days after the pricing date, allowing time for regulatory clearance and settlement preparation. All subsequent valuation dates and contingent coupon payment dates are measured relative to these initial values established on the pricing date.

The valuation dates are subject to postponement if a scheduled valuation date falls on a non-trading day or if certain market disruption events occur. The filing references postponement provisions but does not specify the definition of market disruption events in the preliminary pricing update. Investors would need to consult the accompanying product supplement and underlying supplement referenced in the pricing update for complete details on valuation methodologies and disruption event definitions. The maturity date of August 8, 2028, is fixed and would be adjusted only in extraordinary circumstances related to market closure or similar disruptions.

Regulatory Status and Investor Considerations

The preliminary pricing supplement was filed pursuant to Rule 424(b)(2) under a registration statement and relates to product supplement, underlying supplement, prospectus supplement, and full prospectus documents that investors must review in their entirety. The filing notes that the preliminary pricing supplement is not complete and may be changed, indicating that material terms disclosed herein could be revised prior to final pricing. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities, and no such approval means the investment quality or fairness of terms has been validated by regulators.

The offering documents make clear that these securities involve risks not associated with conventional debt and explicitly warn that investors must be willing to accept the potential for limited or no contingent coupon payments, principal write-down or total loss, illiquidity, and credit risk of Citigroup entities. Investors considering this offering should understand that the higher contingent coupon rate of 10.50% per annum is compensation for accepting these heightened risks and that actual yields may be substantially lower if contingent coupons are not paid. The preliminary status of the pricing supplement indicates that terms remain subject to completion before final pricing occurs.