AIG, U.S. Will Sell $9B In Stock -- But For Less Than Half Of Expected Price

NEW YORK: American International Group and the U.S. Treasury will sell nearly $9 billion in AIG stock, they said on Wednesday, a huge offering but less than half of what had been contemplated earlier this year.

AIG shares fell more than 2 percent in premarket trading on the news, continuing the sharp slide that has knocked more than a third off the company's value in the last four months. At the premarket price, AIG is less than 30 cents a share from the government's break-even point.

To be sure, when AIG was rescued in September 2008, few expected it would even exist today. The company received $182 billion in bailouts and managed to restructure while preserving two core businesses.

But the prospective offering of 100 million shares by the company and 200 million shares by the Treasury has been pressured by the slide in AIG's stock.

A mix of heavy interest from short-sellers betting the shares would fall further, dilution fears for those with long positions and operational questions linked to legacy charges at two AIG units weighed on the shares, driving them from the mid-$40s range to the upper $20s.

AIG said last Friday it needed to raise $3 billion in the offering, which would imply a price of around $30 a share. But one investor said Wednesday the offering was more likely to price at a discount to where the shares are now, a view shared by most sources familiar with the process.

If the stock priced at a 5 percent discount to Tuesday's close, as has been suggested is possible, the offering would be worth $8.44 billion.

When Wall Street banks offered their services to manage the stock sale in January, there was talk of an offering of more than $20 billion.

The U.S. Treasury also has the option to sell an extra 45 million shares to cover any over-allotments, which would raise the value of the sale to more than $10 billion.

Assuming the Treasury sells only the 200 million shares, the government's stake in AIG would fall to 77 percent from the current 92 percent.

(Reporting by Ben Berkowitz; Editing by Derek Caney, Maureen Bavdek, Dave Zimmerman)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[Michel Herbert]

06:18 AM on 05/30/2011

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[pepper1311]

08:12 AM on 05/12/2011

What is sad AIG was and still an excellent insuranse company. Then they became greedy and bought into the mortgage market. Moral, stick to know and do best.

[s2at25]

05:16 PM on 05/11/2011

Hey, America, this is what your subsidy paid for. Government bought out AIG and is now selling them down the drain at half price. That means for every dollor you have top pay the government they get 50 cents to reuse and you have to pay the entire dollar back. Good trick if you can do it and Obama's administration can do it well. I wonder if they waterboarded Bernie Maydoff to get his ideas on this when he first went to prison. Put the Kenyan Kid back in 2012 and you'll get more chances to WASTE YOUR money.

[dennisrs]

08:35 PM on 05/12/2011

Doing the same with GM too.

[solvseus]

06:46 AM on 05/13/2011

You do know the bailout happened under Bush right? And that we've made most of the money back actually. Same with GM and Chrysler, which are now both profitable again.

[George D Smith]

05:01 PM on 05/11/2011

Mistake for the American Public. I am sure that Obama and others (known to him) are very pleased.

[Daniel Gadon]

03:50 PM on 05/11/2011

JUST A THOUGHT Money Used To Make the World Go Round...Now It's Making The World Go Downnnn! Save The Poor...But Now There's More...Save The Homeless...But Now There's More...Get an Education...But How Many Can Afford It...Save The Planet...But What About the Oil Spills...Nuclear Accidents...Cutting Down of Trees...Save The Rain Forrest....For Many, Many, Many Years These Have Been Humanities Goals...How After So Many Years It Continues With Even More Intensity??? What's In The Way Of These Progresses...Could The Answer To That...Be The Reasons Why Man Seems To Be Digging A Bigger Whole? JUST A THOUGHT

[mheavysouth2]

03:46 PM on 05/11/2011

People who don’t understand the psotion most of us are in, being “Taxpayers”, are bailing out AIG.
It's time to put controls in place so that the people who are non-taxpayers have no vote in how to spend our taxpayer money.
This has really gotten out of hand. It's time to revamp our tax laws because they are not working for us who pay taxes.

Dr MEM

[Daniel Gadon]

04:28 PM on 05/11/2011

JUST A THOUGHT...Anyone Who Makes Purchases Is a Taxpayer, and Flippantly Leaving Part of Society Out of the Mix is a Dangerous Proposition...Being For The Most Part, We All Have To Live In Society Under The Same Laws, and Conditions, and No Matter How Much Education, Money or Power These Men Have...Part of The Big Picture, In All Our Faces Is...We're Still Screwed Up!

[Tobin C Rote]

03:25 PM on 05/11/2011

AIG is doing nothing that every other public company does when they need money. They go to the stock market and sell shares. AIG needs money so they are selling shares. The government wants to reduce the 1,646,800,000 shares that it holds in AIG. So they are selling shares. As a reminder this is 92% of the outstanding shares.

While most of the commentors don't seem to agree with the actions of AIG and the Treasury, the stock market does. Today, with the DOW down over 150 points, AIG is up $1.23 a share. This works out to +/-$2,400,000,000 more for the governments investment. Volume today is over 11,000,000 shares. This is almost 3 times average daily volume.

[Cosatjockomo]

04:53 PM on 05/11/2011

. . . and it's all play money that can vanish at the whim of the next negative headline.

[Tobin C Rote]

11:15 AM on 05/12/2011

Sure it is. That's wiht any stock. That's the risk you take for the potential reward. Today, with the DOW down +60 points AIG is up a penny(at the time of this writing). If it continues to act like this over the next couple of days I would say that, if you have a longer term view, AIG might be worth investing a few $$$$ in.

[larrytpsnm]

03:05 PM on 05/11/2011

Wish someone could get AIG to give me my little sum of $3800 so I could get clear of them. No they probably will not release it they like keeping other peoples money.

[maybe latter]

03:37 PM on 05/11/2011

Wish they would give me mine too. They owe me over a years workers comp but don't want ti pay. They also won't approve some of my doctors requests.

[mastersmind63]

05:05 PM on 05/11/2011

The company does not control WC, it is an insurance company that the company pays into. Or are they self insured?

[dreamhomes4edu]

02:19 PM on 05/11/2011

These same politicians who have allowed all of this corporate greed and rape of the American economy are also voting to steal our tax dollars by undermining public education and giving the funds to their buddies and relatives who are trying to privitize education. These guys do NOT represent the people they represent the Fat Cat corporations and their elite leaders of thieves.
It is time we started electing people who will try to enact term limits and represent the people not corporations. Quit voting for people based on whether they agree with Roe vs Wade or not and start voting for the person who will represent you instead of the Fat Cat on wall street!

[ngulf]

02:31 PM on 05/11/2011

They all represent one special interest group or another. Get rid of them all, is a solution we can live with.

[dreamhomes4edu]

03:17 PM on 05/11/2011

That is akin to saying "I am going to vote for the guy I know is lieing to me because all politicians are liars and corrupt."
Techinically you are correct that they all represent one special interest or another but some special interest groups are more worthy to represent than others.
Public school teachers and Insurance companies are both "special interests" but I would say that teachers advocating a quality education for all is a little more honorable than insurance companies wanting to raise rates and cut coverage to make larger profits.

[JamesB007]

02:48 PM on 05/11/2011

Is true what you say. I read at www.replypages.com the same thing you wrote almost
to the point. The sad thing is that 100,000 and 100,000s of people work on this company.
There jobs should be protected while geting rid of those Fat Cats. Fat Cats have
always been the problem. I hope some one see this. You could get a sample of this when you
watch Shark Tank. I hope the Democratic party is reading what we write. Maybe they could learn something but as you know the Republics have done the same things for years.
So what to do? Sad but true the Tea Party is not the answer too. So what to do?

[dreamhomes4edu]

03:06 PM on 05/11/2011

I would say the first thing we need to do is to stop voting along party lines. Lincoln said "A house divided against itself can not stand" I know he was not talking about political houses but it applies here as well. The powers that be have the people so busy fighting with each other over which party is right and which one is evil that we are letting them rob us blind right under our own noses. They know that it is a lot easier to get someone to be passionate about one side of the spectrum or the other and they manipulate the public into a frenzy. What we need are intelligent people who can get the public to realize what is being done and get them to understand that either extreme is wrong and advocate the middle ground. Then maybe we could start having intelligent discourse and come together for compromise and move this country forward.
Until "We the people" stop letting those Fat Cats in charge manipulate us into fighting with each other we will never be able to take back our country.

[Dan noway]

02:16 PM on 05/11/2011

Well, somebody Tell Obama quick. I am sure he wants to give them billions more to bail them out again. he just LOVES giving away our money to worthy causes like AIG, Afganistan, China, and all the other causes that give us NOTHING in return.

[Youcantstandthetruth]

02:26 PM on 05/11/2011

Oh darn, aig bailout was part of TARP, bush's baby. Ouch, bush started the invasion of Afghanistan and hand selected Karzi. Obama is giving money to China? What did he do, buy something from walmart?

[Tobin C Rote]

03:01 PM on 05/11/2011

Umm, not all of the bailout that AIG received was from TARP. And TARP has actually been a pretty successful program as most if not all of the money will be repaid. With interest and dividends. We originally went into Afganistan to get OBL, remember?.

[Youcantstandthetruth]

02:27 PM on 05/11/2011

I do have to agree with Bush going into Afghanistan, He just should of gotten OBL at Tora Bora and that would of been over years ago.

[El Duche]

02:54 PM on 05/11/2011

or maybe clinton should have when he was in power

[zekandzora]

02:11 PM on 05/11/2011

My alternativ­e recommenda­tion to The Feral Reserve is to go back to The Constituti­on of The United States where it is clearly stated that the Congress has the sole responsibi­lity to print and coin money and to determine the value of the money. The Treasury Dept. can easily handle the printing process. This would forever eliminate the fraud of paying interest and incurring debt to a privately owned, for profit money printing monopoly, like The Federal Reserve. Declare the "National debt" as null and void due to the massive fraud and unconstitu­tionality of the Federal Reserve Act.. Abolish The Federal Reserve and it's evil servant, the IRS. This nation got along just fine with out an income tax or the IRS for nearly 130 years. That will free up about $750,000,0­00,000 to $1 trillion per year at current expenditur­es. Issue money on a formula that incorporat­es population and gross domestic product. Avoid like the plague getting into gold or silver backed currency because the same oligarchic­al families and businesses who control our economy now through the Federal Reserve have control of the world's gold and silver markets. Return manufactur­ing to this country by what ever means are required. Prosecute those members of government who are found to have committed treason and/or violated their oaths of office. Investigat­e and prosecute those individual­s in and behind The Federal Reserve fraud who have defrauded the American citizens for 98 years.

[lnl80388]

02:52 PM on 05/11/2011

Zek,
You have stated to many true hard facts for most of the socialist liberals here in Huffing land.
Most of these democrat socialist liberals just want to see more social spending, they don't care where the money comes from or who has to pay for it so long as it's not them.
They care not about the Fed or this nation for that matter.
That's why Illegal invaders are welcomed, just come on in there's plenty for everyone.
It's looking grim Zek!

[JLFL]

03:11 PM on 05/11/2011

Umm, us "socialist liberals" are generally for nationalization - its Republicans who are opposed to such things. The fact that we actually have the Constitutional authority to take over the banking system and we don't do it falls mainly in the hands of Republicans who oppose nationalization at EVERY possible turn.
Please do some research, educate yourself, and get your facts straight.

[silsez]

02:09 PM on 05/11/2011

And management has probably already approved the first 80% off the top for bonuses. If ever a company deserved to fail due wholly to corporate greed bordering on corruption, it's AIG.

[Tobin C Rote]

03:10 PM on 05/11/2011

I think a better example of corporate greed would be the brokerages such as Merrill, Lehman, Bear Stearns, that owned most of the large subprime mortgage companies. Ever thought about the bonuses paid(Note I did not say earned) by those firms. They were the ones that were generating the loans that everyone blames for bringing down the economy. AIGs role in the mess was that it over leveraged the CDOs and MBSs with what basically ammounted to an insurance policy. Their failure was to not foresee what affect a down housing market would have on them. Well, they found out in a big way. This is why they needed the bailout. They had to pay the claims on the policies and they did not have the reserves. I agree that the bonuses paid after the bailout should not have been. But ultimately the government should do well with AIG. Today, with the DOW down +/-150 pts AIG was up $1.25 on 2.5 times average volume. That's $2.4billion to the good for the government.

[CandyRaptor]

05:43 PM on 05/11/2011

The AIG employees who are at fault for the credit default swaps took their huge bonuses and flew the coop before the crash. The prople who are left in the company are mostly regular people.

[jeb29615]

02:09 PM on 05/11/2011

Maybe the government should see if they can get a group of navy seals to take out everyone who works for AIG and makes more than $100K...they are a far bigger terror than anyone in the middle east...

[Tobin C Rote]

03:11 PM on 05/11/2011

That's such a ridiculous comment! It demonstrates that you really don't know much about actual facts!

[jeb29615]

09:09 AM on 05/13/2011

I question where you get your "facts" from??? Common knowledge that within a month after our brilliant government decided to steal OUR tax dollars to "bail" these guys out they went on extravagant luxury "retreats" and paid the top 10% of it's work force BILLIONS!!! those are the FACTS

[zekandzora]

02:09 PM on 05/11/2011

HOW DO YOU DESTROY A NATION ????

Give a privately owned, tax exempt, foreign controlled, for profit, unconstitutional, fraudulent { it's very name is a fraud }, corporation a monopoly on the printing of YOUR money and then let them lend you back YOUR money at what ever interest rate they chose to charge you. Let there NEVER be a real audit or any real governmental oversight of the monopoly. Allow the employees of the money printing monopoly to gain key positions in the government like for instance The Secretary of the Treasury { sounds like Timmy Geitner to me }. Allow the money printing monopoly and it's multinational satellite corporations to pay-off, bribe, blackmail, influence, threaten and manipulate the key members of all branches of government to support the money monopolies agendas even if it destroys the host nation. We are the host nation and the parasites that are ******* us dry are all aligned with The Federal Reserve which is NOT federal and has NO reserves. It is the unconstitutional money printing monopoly that is INTENTIONALLY destroying our once great and free country.

[IFGA]

02:26 PM on 05/11/2011

So let them fail. I am sure that the insurance industry would not fall apart. If they were to go out of business, the customers they have would just go to another provider.

[Tobin C Rote]

03:13 PM on 05/11/2011

Umm, I don't think he was talking about AIG!