pelican

AIG Overpriced? Perhaps Not as Much as Barron's Thinks

"With $185 billion in debt, AIG is certainly not in great shape right now.
***Understatement of the summer?

"But its $35 billion stock market value doesn’t look like too much to pay when considering the longevity of the insurer, either."

***I'm sorry but what does this mean? Are you suggesting the AIG brand is what it once was? Are you saying AIG will be around for years to come? I'm not sure you can make this statement without backing it up with more financial analysis.

"In an aggressive market environment, rapidly spurred by Asian investment (despite the volatility), it’s almost fair to say that the current market capitalization of AIG reflects the prices its various remaining today will rise to in twelve months time."

***Almost fair to say? Again, based on what analysis? The company has not been getting good prices for its assets and saying they will over the next 12 months doesn't mean it will happen.

To be honest, I'm stunned that you haven't mentioned how the CEO recently stated the value of the assets now is less than what they owe the government. As noted in a Motley Fool article today, assets were reported = $58 billion (book value even though they've been getting less than book) and they owe $80 billion. So you don't just need some increase in assets values, you need a heckuva increase just to pay off the government. In the meantime, as the company sells assets, its earnings power decreases. So after the government is paid off - assuming for a moment they actually are paid in full - you've got the bondholders. Any crumbs left go to the shareholders, and I seriously doubt they will see anything. AIG is going through a forced liquidation which even the CEO admits will make it challenging to even end up with a company that is a former shell of itself. Nonetheless, you make it sound as if its a given that the stock will continue to rise, let alone the company even existing over the next decade.

There is something very wrong with this kind of article and I think its because it reminds me of others I've seen in recent years; the kind that touts companies on the brink (e.g. mortgage companies). In my view, there needs to be greater responsibility explaining the potential (and often enormous) risks.