AIG Stock Dips After $8.7 Billion Share Sale by U.S. Treasury

By | May 25, 2011

of American International Group Inc. fell 3.6 percent Wednesday after the insurer and the U.S. Treasury sold $8.7 billion worth of AIG stock.

The Treasury sold 200 million shares, reducing its stake in the company to 77 percent from 92 percent, but it still has 1.5 billion shares left to sell to fully exit its investment.

Two and a half years ago, AIG was on the brink of bankruptcy. Now, after government bailouts totaling $182 billion, Washington is beginning to get its money back.

The question is how quickly the Treasury will be able to sell its remaining 1.5 billion shares and whether the investment, overall, will be profitable.

The government did not rescue AIG with the intention of turning a profit but to stem a worsening financial crisis in late 2008.

But so far, the government is in the money: The Tuesday share sale, which included 100 million shares sold by AIG, came at $29 a share, higher than the average price of $28.73 the Treasury needs to break even.

A Treasury official said on Tuesday night that a full accounting would have to wait until the Treasury completes its exit, but he said he was hopeful the government would break even. He said there was no specific timetable for the exit.

AIG shares were down 3.7 percent at $28.36 in midday trading on the New York Stock Exchange.

There are signs that demand for AIG shares might not be as strong as some originally thought. The Treasury and the company agreed only earlier this month on the size of the Tuesday offering. Banking sources suggested earlier this year that the share sale could be worth $10 billion to $20 billion.

Underwriters on the offering were led by Bank of America Merrill Lynch, Deutsche Bank Securities, Goldman Sachs & Co and JPMorgan.

(Reporting by Clare Baldwin; Editing by Derek Caney, Lisa Von Ahn and John Wallace)

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