Top Business News
AIG's Equity Dangerously Close to Zero
Jeanine Poggi
07/09/09 - 02:56 PM EDT
American International Group's(AIG) equity could be nearing zero -- or so says a Citigroup analyst.
The news sent shares of the flailing insurer plunging 22% to $10.26 in afternoon trading. Shares of the company have been on a downward spiral after shareholders approved a 1-for-20 reverse stock split last week. AIG closed at $1.16 that day, which is equivalent to $23.20 assuming the reverse split.
In a note, analyst Joshua Shanker said the risk of more credit default swap losses and management's eagerness to shed assets and discounted prices jeopardizes AIG's equity position.
As a result, Shanker cut his price target on the stock to $14 from the split-adjusted target of $36. He maintained his hold rating.
It seems every other day AIG sheds another layer from its massive portfolio in an effort to repay the $180 billion bailout from the government. Recently, for example, AIG said it would relieve itself of its Taiwan life insurance unit and its consumer-finance operations in Russia.
And on Thursday it was reported that AIG is discussing a possible deal to sell all or parts of its foreign life-insurance unit American Life Insurance to MetLife(MET).