Texas-Based AIG’s Largest Private Shareholder Says US Will Likely Sell Its Shares in the Insurer At Lower Price than Expected

Bruce Berkowitz, who is the Texas-based American International Group Inc.’s largest private shareholder, says he thinks the US government will sell its shares in the insurer at $27 to $29-that’s lower than the insurer’s “book value” and definitely lower than what he paid for most of his position. Berkowitz, who is the manager of the $17.5 billion Fairholme Fund, is the owner of approximately $1.2 billion in AIG stock. This week, the government said it would sell 300 million AIG shares to the public.

At the end of March, AIG’s book value was approximately $47.66 a share. It’s stock is currently trading at a deep discount to that figure. AIG share prices have gone down as of late-they hit a $50 plus high at the start of the year when warrants that the company issued were factored in-because of anticipation that the Treasury Department would start selling its 92.1% stake in the insurance giant during a large share offering. The US has so many AIG shares because it intervened with a $182 billion bailout after the insurer was hit by the financial crisis in 2008.

The Treasury had paid $47.5 billion for approximately 1.66 billion AIG shares. Break-even price was $27.70/share. If investors are wanting to pay lower than this, the government might decide to share a smaller amount of shares to start. Closing price of AIG shares on Tuesday was $29.62, meaning the US’s 300 million shares were worth approximately $8.89 billion.

If demand for the shares turns out to be high, the US could make a profit. Approximately $4.3 billion in AIG shares are held by investors other than the US government.

Our Texas securities fraud lawyers represent institutional and individual investors throughout the state.

Related Web Resources:
AIG Price: Bad News For A Big Investor, Wall Street Journal, May 10, 2011
Business in Brief: AIG, Inside Bay Area, May 12, 2011

More Blog Posts:
AIG Trying to Get More Investors to Buy Life Settlements, Institutional Investors Securities Blog, April 26, 2011 AIG Reorganizes Property and Casualty Insurer Chartis, Institutional Investors Securities Blog, March 31, 2011
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