Posted: 05/11/11 08:22 AM ET
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NEW YORK: American International Group and the U.S. Treasury will sell nearly $9 billion in AIG stock, they said on Wednesday, a huge offering but less than half of what had been contemplated earlier this year.
To be sure, when AIG was rescued in September 2008, few expected it would even exist today. The company received $182 billion in bailouts and managed to restructure while preserving two core businesses.
But the prospective offering of 100 million shares by the company and 200 million shares by the Treasury has been pressured by the slide in AIG’s stock.
A mix of heavy interest from short-sellers betting the shares would fall further, dilution fears for those with long positions and operational questions linked to legacy charges at two AIG units weighed on the shares, driving them from the mid-$40s range to the upper $20s.
AIG said last Friday it needed to raise $3 billion in the offering, which would imply a price of around $30 a share. But one investor said Wednesday the offering was more likely to price at a discount to where the shares are now, a view shared by most sources familiar with the process.
If the stock priced at a 5 percent discount to Tuesday’s close, as has been suggested is possible, the offering would be worth $8.44 billion.
When Wall Street banks offered their services to manage the stock sale in January, there was talk of an offering of more than $20 billion.
The U.S. Treasury also has the option to sell an extra 45 million shares to cover any over-allotments, which would raise the value of the sale to more than $10 billion.
Assuming the Treasury sells only the 200 million shares, the government’s stake in AIG would fall to 77 percent from the current 92 percent.