AIG investors see freedom ahead

Shares of AIG are rising following a report that the US government may soon sell its stake.

By TheStreet Staff Apr 23, 2010 1:08PM

TheStreetBy Lauren Tara LaCapra, TheStreet

 

The US government may soon cash in on the surge in American International Group (AIG) stock.

 

The Treasury Department owns $47 billion of preferred stock in AIG, which can be converted into common shares. The government holds an 80% stake in the insurer, whose market value is less than $6 billion.

 

Bloomberg reported today that the Treasury is forming plans to wind down its AIG stake over two years, citing unnamed sources. The process could begin as early as the fourth quarter.

The government would need to sell over time instead of dumping the shares all at once to avoid hurting prices. It’s using the same strategy to exit its large position in Citigroup (C).

 

Spokesmen from AIG and the Treasury declined to comment on the report.

 

Though still beleaguered by political concerns, AIG has made progress in its restructuring effort in recent months. Under Chief Executive Robert Benmosche, the firm has been working to sell noncore divisions, moving forward on plans to repay bailout funds to the Federal Reserve, and winding down a huge portfolio of derivatives trades that brought the insurer to its knees.

 

AIG shares, which had reached penny-stock territory before a 20-for-1 reverse split last year, have soared. AIG shares have gained 48% during the past year and 44% this year, as of Thursday's close at $43.25. They were up 3.8% as of 1 p.m.

 

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