Discussion in 'Stocks' started by ksonsinc, Mar 9, 2010.
Woh just look at it rocket
All the short,s covering up to cover
Short Squeeze still in effect
On 6 August AIG announced that it was in negotiations with the US Treasury regarding the possibility of the government reducing its equity stake in the TBTF insurance company.
I have a view that is similar to that of the author of the above article. If the equity is repaid (and that's debatable) then it will result in significant dilution for existing AIG shareholders.
At a share price of $36-ish, I don't think this dilution is priced into the stock.
I would think all of that is priced into the stock already.
You could be right; time will tell.
For what it's worth, I don't think the dilution as a result of the sale of preference and/or common shares is priced into the stock, especially since the current market cap of AIG is about 5 billion USD and the value of shares to be sold is over 40 billion USD.
"AIG Plots End to U.S. Aid"
"Under the plan, which could commence as early as the first half of 2011, the Treasury Department is likely to convert $49 billion in AIG preferred shares it holds into common shares, a move that could bring the government's ownership stake in AIG to above 90%, from 79.8% currently, the people familiar said. The common shares would then be gradually sold off to private investors, a move that would reduce U.S. ownership and potentially earn the government a profit if the shares rise in value."
That's a very interesting article.
At this point, I'm kind of unsure about AIG overall. Given its price action the last couple of weeks, it might be good to wait and see if it is able to hold above 37.50 or instead breaks down below 35.00 without major buying interest waiting down there.
I'm having another look at AIG.
It was noticeable that despite the manic short squeeze into yesterday's close, AIG only closed up by a small amount.
Then this morning it broke to a new intraday low below 19.93 while the $SPX and the financials were at or near highs of the day.
From my poor-man's Bloomberg,
AIG CDS was at 540 on Monday, higher than BAC and roughly the level at which MS was trading on that day.
I'm more bearish on BAC and MS, but I'll keep an eye on AIG given its underperformance this week.
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