Saul Sterman

AIG: Closing My Long Position

@VivaVegas

Your lucky that I had a quiet day! Last reply...
I don't know where you are getting your info from. I read the same MarketWatch article that you did. The government owns 79.9% of AIG. Any further dilution doesn't come from the government's 79.9% stake but from your stake (20.1%).
Apparently AIG can issue preferred without a shareholder vote but not common. The commitment is to issue the common and replace the preferred.

That's all the article is saying.
BTW, If shareholders vote against, then AIG files for bankruptcy! Shareholders have no choice.

AIG: Closing My Long Position

@VivaVegas

I take it that after reading the MarketWatch article it is clear that the Government holds an 80% equity stake in AIG.

I see how the format can be a bit confusing, but the reason it is being done this way is because of company bylaws. A shareholder vote is probably still needed before common can be issued.

AIG: Closing My Long Position

@TomArmistead

Appreciate your comment.

The way I look at this is simply that there is a reasonable chance for a 'national' bailout of sorts, whether it is $700B or $500B is not a major factor.

This will create enough of a safety net that will create a 'bottom' value for CDO, CDS and other instruments. In other words, if the value falls enough, the government will buy.

Having said this, think how much potential upside there is for AIG. Compare this with let's say ABK as mentioned in the article. Because of the 80% equity stake, AIG has limited upside whereas ABK that does NOT have an 80% dilution can hit the $12 target that VivaVegas is looking for. ABK is depressed because of a possible Moody's downgrade. Once the 'national' bailout is completed, both should appreciate. The reason for a possible downgrade disintegrates into thin air as well. The big difference is, whereas AIG shareholders transferred 80% equity to others, ABK shareholders did not.

In other words, should the $700B plan go through, ABK will benefit far more than AIG. Should the plan fail, AIG's rescue is at risk as mentioned in the article. ABK on the other hand can dilute by 20% and stay in business. As it stands now, ABK is pricing in a 20% dilution and no bailout. In other words, no downside and only upside. I think the chance of some sort of 'national' bailout is pretty good...but waiting to see what the market says. Just like with AIG, I didn't get in at $2 and change but waited a bit. Likewise with ABK. If it jumps and I miss it, no sweat...there is always another. Just be patient.

AIG: Closing My Long Position

@VivaVegas

I've been in business for well over two decades and I know how to read an 8K. It is not by coincidence that I posted the S&P understanding of the 8K above.
Sorry my friend, but your understanding of what is transpiring is incorrect. Don't feel bad, others are confused as well. If your understanding was remotely true, AIG would be trading much higher and the S&P target price wouldn't be $5.50.
Think of it this way, there isn't a single analyst out there that has a $12 target price.

AIG: Closing My Long Position

@malapraxis1

See stocks.about.com/gi/dy...

"In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG."

The equity stake is not contingent on whether the loan is paid back or not. The stake is for giving the loan in the first place. This is precisely what the twelve largest shareholders are attempting to avoid.

Trust this clears things up a bit. Also see SEC filing here:
stocks.about.com/gi/dy...

"The summary of terms also provides for a 79.9% equity interest in AIG."

Saul Sterman

AIG: Closing My Long Position

@VivaVegas

From Standard & Poor's research:
"09/23/08 02:46 pm ET ... S&P REITERATES HOLD RECOMMENDATION ON SHARES OF AMERICAN INTERANTIONAL GROUP (AIG 5.08***): The shares have more than doubled from their September 17 close of $2.05 but are down over 90% year to date. We tie the recent strength to enthusiasm that AIG's credit default swap assets may suffer less of an impairment if the Treasury's bailout plan is passed. But we note AIG's 6/30/08 tangible equity of some $26 a share. Adjusting for the 79.9% stake in AIG the Fed is expected to receive under terms of its loan, tangible equity would equal about $5.23 a share. Our target price of $5.50, raised today by $0.50, assumes the shares trade at about 1X adjusted tangible equity. /C.Seifert "

In plain English, the 'Fed' as you call it, takes an equity stake. The article is correct.

Saul Sterman

Why I Bought AIG Last Week

Respectfully disagree with author.
See
www.crossprofit.com/ar...

It's not that simple at all.
Disclosure: no current position.

Wall Street Breakfast: Must-Know News

Regarding Huntsman (HUN), see article beneath 2008 chart here:
www.crossprofit.com/vi...

As stated in article, no position was taken in this arbitrage. As the title suggests, there were just too many question marks popping up. Upon this last earnings miss, Apollo called a MAC yesterday effectively nullifying the acquisition agreement. There may NOT be a break-up fee though HUN has gone to court!

HUN should have negotiated a new price tag though the whole scenario is very problematic as certain shareholders already cashed out. This deal looks dead; funeral dance (courts) to follow.

Saul Sterman