Treasury Sale of AIG Shares Hammers Share Price (AIG)

At one time US taxpayers owned more than 90% of American International Group Inc. (NYSE: AIG). Today taxpayers own about 63% of the insurance giant, following AIG’s purchase of about 65 million shares from the US Treasury for $30.50/share. The sale totaled about $5 billion.

Following a strong quarterly earnings report, AIG shares closed last week at $32.94, well above the price the company paid for the Treasury’s shares. Traders immediately pushed the price of AIG shares down to the price paid to the Treasury Department, but prices have recovered somewhat since then.

Depending on one’s view of what the Treasury paid for AIG’s stock, US taxpayers made a profit of about 6% on the shares it sold today based on the Treasury’s stated purchase price of $28.73/share. There is an argument, however, that the AIG stock actually cost taxpayers $43.53/share, which means that today’s sale totes up to a loss of about -30%.

The one indisputable aspect of today’s sale, though, is that the Treasury received $1.50/share more from AIG than it had in two previous sales. A research note from Bernstein notes “future offerings will likely be priced at levels at or above today’s offering price, for we think the weekend trade has taken away the prospect of another offering at $29 and will force a decision on the investors who’ve been waiting for the stock to return to that level.”

Shares of AIG were down about -7% right at the opening, but have since come back slightly, to trade down -5.6% at $31.00 in a 52-week range of $19.28-$35.05.

Paul Ausick