The Treasury reportedly is considering a plan to unload its majority $47 billion stake in American International Group (AIG) over the next two years.
The Treasury would convert its preferred shares into common stock before selling, a source told Bloomberg. The Treasury infused the money into AIG in 2008 when the world’s largest insurance company nearly collapsed thanks to its activity in the derivatives market.
AIG’s stock price has jumped almost 30-fold over the past year, but experts say it would be unwise for the Treasury to sell all its shares immediately.
“You don’t want to dump shares all at once into the market, you want to do it in an orderly way so the market can digest them,” Charles Calomiris, a finance professor at Columbia Business School, told Bloomberg.
“It’s looking like taxpayers are going to get more of their money back,” he said.
Taxpayers own almost 80 percent of AIG and could lose $30 billion bailout, according to the Government Accountability Office.
“The question is, how much value is really there,” William Poole, former president of the Federal Reserve Bank of St. Louis, told Bloomberg.
He and others are bullish on the Treasury’s plan.
While the share overhang from a potential sale could weigh on the stock, the news should be viewed as a positive, because shareholders will be left with a "clean" company that is 100 percent shareholder owned,” according to StreetInsider.com.
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