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AIG: Like LinkedIn ... Without the Upside

NEW YORK ( TheStreet) - Talk about an anticlimax.

American International Group's (AIG - Get Report) secondary offering that will likely be priced Tuesday will meet a collective yawn from investors, less than a week after traders sent LinkedIn's (LNKD - Get Report) initial public offering skyrocketing.
AIG CEO Robert Benmosche

"It is not going to have the allure. The excitement of LinkedIn was like having a baby, while the AIG re-IPO is like a patient surviving a heart attack," says Steve Gerbel, founder and president of Chicago Capital Management.

AIG is expected to price 300 million in shares by close of business Tuesday, at around $29 to $30, said Scott Sweet co-founder of IPO Boutique. The offering of the government's 92 percent stake in AIG is actually a "re-IPO" of the shares acquired after the U.S. Treasury Department doled out $85 billion to bail out the insurer in 2008.

But despite three years of anticipation Wall Street is decidedly ho-hum on AIG's plans.

"LinkedIn was a far more speculative story compared to AIG, which has been around for many years. It is the government selling the stake after a bailout, so it doesn't have the same excitement," says Sweet. "In addition, AIG is a very large deal. They are selling 300 million shares compared to LinkedIn's 8 million."

Sweet added that the number of shares in the AIG IPO will limit the price sensitivity that made the LinkedIn IPO so exciting and caused some consternation in the markets. Critics have accused LinkedIn's underwriters of keeping outstanding shares to a minimum in order to ramp up demand. LinkedIn's IPO jumped from its $45 offer price to $94.25 on the first day of trading due to the demand for the shares.

Shares of LinkedIn are currently trading at $88.89.

But with hundreds of millions of AIG shares getting ready to flood the market, traders will the less than enthusiastic about getting in on the deal.

""The excitement of LinkedIn was like having a baby, while the AIG re-IPO is like a patient surviving a heart attack.""

"There is overhang in the AIG offering and there is a chance they may not be able to sell it all," adds Gerbel. "The LinkedIn deal had a specific amount to sell out. You know underwriters received calls from brokerages for the IPO where is AIG is saying 'please take this off our hands.'"

Ben Willis, a trader at Sunrise Securities agrees that the AIG IPO is nowhere near as exciting as the LinkedIn offering.

"If that were the case, the U.S. taxpayer could sell the whole position at a huge profit. This is the market pricing a deal over 5 months and the existing shareholders voted with their feet, not their check book," he said in an email.

Another factor that differentiates the IPOs is the business itself. White and Case partner Ernest Patrikis says the insurance business, "just isn't as sexy." LinkedIn has 100 percent growth opportunity, while AIG is in the process of restructuring its business in order to find growth opportunity, he adds.
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