This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

AIG Buybacks Getting a Little Stressed: Street Whispers

NEW YORK ( TheStreet) -- Shareholders of American International Group (AIG - Get Report) will need to show a little patience before riding the buyback gravy train again.

Up until Monday, when the U.S. Treasury Department sold $18 billion worth of AIG shares at a price of $32.50 a share, the government was taking a steady approach this year in unloading its holdings of the insurer's common shares, which it received in April 2009 in exchange for $69.8 billion in preferred shares as part of the insurer's massive bailout.

Before Monday's sale, the Treasury controlled 53% of AIG's common shares, after previous government offerings of common shares in March, May and August were repurchased by AIG. Those benefited all shareholders -- including the government -- by reducing the share count and pushing up earnings estimates, along with the share price.

The Treasury now has a minority stake of 21.5% in the company.

AIG's shares were up 44% year-to-date through Monday's close at $33.30.

When AIG last week announced it would sell up to $2 billion in shares of AIA Group Ltd., partially funding a new $5 billion share buyback authorization, some analysts who had anticipated much higher buybacks were disappointed, however, there was no indication of just how big a block of shares the Treasury might sell.

The Treasury's decision to dump an additional $13 billion in shares, on top of what AIG bought back, signals that the government no longer thinks the slow approach to unwinding its position is in the best interests of taxpayers.

When the Federal Reserve holds its next round of stress tests for very large "systemically important" financial institutions early next year, AIG will be included among the companies required to submit detailed capital plans to the regulator. Sterne Agee analyst John Nadel -- who rates AIG a "Buy," with a $39 price target -- said last week that regulators may have already "informed AIG that it shouldn't push its capital [management] activities any higher."

Too big to fail.

After AIG faced a liquidity crisis and appeared unable to meet collateral requirements for its credit default swap counterparties, the Federal Reserve and the Treasury began the company's epic bailout. At the time, few envisioned a happy ending for the insurer.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AIG $54.97 0.29%
AAPL $92.71 -0.57%
FB $119.17 1.20%
GOOG $708.79 1.00%
TSLA $215.21 1.70%


Chart of I:DJI
DOW 17,738.13 +77.42 0.44%
S&P 500 2,056.00 +5.37 0.26%
NASDAQ 4,727.5360 +10.4420 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs