AIG Lives Another Day; Shareholders? Not So Much

It's official, AIG (AIG) will not go under. See the details in the Fed Release.

This had to be done and it is being done in a way that current shareholders, will see little benefit for quite some time (if ever if they bought their shares last year).

The market really did hold its own through Bear Sterns (BSC), Fannie (FNM), Freddie (FRE) , Lehman (LEH) and Merrill (MER). There are, however, only so many shots anyone can take before throwing in the towel and AIG may just have been that final shot for the market and its participants.

What does remain to be seen is who starts picking up pieces of it now that the process will begin.

No word yet on any management changes yet. More to follow.

Comments

[Jake balkin:]

Nationalization can't be something that foreign investors in US markets will see as a positive. Say bye bye to sovereign funds and their money. The sheiks will be putting their money under their matresses instead.

2008 Sep 17 05:10 AM

[User 260553:]

For your information,if Government valued 79,9% stake 85 billion,the rest(20.1%) is valued 21 billion!What does it means?It means Aig should trade close to 8$!Go to study math!

2008 Sep 17 05:10 AM

[User 264111:]

AIG would have been worth $100B+ in a Chapter 11 breakup sale - that's $25 per share. Plus is the unrealized losses ever move back to the company, that's another $5. With this in mind, this deal appears terrible to shareholders, as the government reportedly gets 80%. Isn't the Board's first job to protect shareholder value???

2008 Sep 17 06:00 AM

[User 260553:]

8$ is better than nothing!I bought at 5$ and happy i did it!

2008 Sep 17 06:11 AM

[fxtrader07:]

@user 260553: anyone who claims he is happy to have bought a stock at $% while it now trades at $3-$4 is deveiving himself and/or others.
while you could make a case for a $8/share book value after dilution this doesn't guarantee you at all that aig will ever trade at $8 again. fire sales and those $17-$18 billion in interest payments on the fed bridge loan will go a long way in destroying book value.
Ihave no idea at what price AIG's shares might trade ayear from now, but my best guess is it will be somewhere between $1 and $5. if another dilutive loan is needed then áll bets are off, of course

2008 Sep 17 06:33 AM

[fxtrader07:]

sorry for the typos. it should have read
'anyone who claims he is happy to have bought a stock at $5 while it now trades at $3-$4 is deceiving himself and/or others.'

2008 Sep 17 06:34 AM

[tilut:]

AIG stock should trade around 10$ a year from now.

2008 Sep 17 06:42 AM

[learnthetruth:]

$85B is NOT an investment in AIG. It is a loan to be repaid. That adds a $85B LIABILITY to the company. The 80% equity stake is a loan processing fee. This will work similar to Ch. 11 BK but in a 2 year orderly liquidation by the Feds. The only problem is you lose $80B of the proceeds from the sale of assets to the Feds plus AIG shareholders get 20% of proceeds remaining versus 100%. AIG shareholders got shafted! Do your math!

2008 Sep 17 06:47 AM

[stay strong:]

To learn the turth:

Are you saying that the govt owns 80% of AIG now AND AIG still owes $85B of loan?

2008 Sep 17 07:45 AM

[TBill:]

That's right, the $85 b is just a temporary loan. Now, what's 20% of this company worth?

2008 Sep 17 12:02 PM

[billddrummer:]

Don't forget that AIG is paying 11.5% interest on this loan. So the effect on operating results will be material.

2008 Sep 17 12:04 PM