The Treasury Department has changed his plans to sell its 34 percent stake in Citigroup Inc. after seeing the investors demanded a much lower than expected price.

The Treasury said it planned to sell as much as $5 billion of stock in the New York Company.

Citi cleared its intention of raising cash to repay its debts; it said it will sell 5.4 million common shares at a steep discount to raise the cash it needs to repay $20 billion of the $45 billion in government support it received. Citi is selling the common stock at $3.15 a piece, offering a discount of 8.7 percent.

Some more than 35 million tangible equity units, which are convertible, are also being sold by Citi.

Looking at the potential paper loss of $770 million on Citibank investment, the Treasury said it had decided to hold off selling any of its shares until next year.

"Based on today's offering price, Treasury has decided not to participate in the equity offering", a Treasury official said. "We expect to divest the government's stake in Citigroup shares over 12 months".

Thereafter, Citigroup shares declined by nearly 7% to $3.21.