AIG (NYSE:AIG) the beneficiary of “Too Big To Fail” is negotiating with Treasury to buy back some of its shares. This of course reduces the outstanding float and engineers upward the EPS. Governance question becomes should Uncle Sam have preferred status or should it be an open market operation where all investors could sell into the new liquidity.
Right now Treasury is sitting on some nice profits. Very unusual for a government involvement. AIG ultimately would prefer to reduce government involvement and keep the rest of their public float in strong institutional hands which are inclined to a buy and hold philosophy. The buy and hold philosophy will be rewarded when AIG returns to paying substantial dividends. Then as it resurrects its pedigree as a blue chip dividend payor the stock will continue to soar until it trades on the new yield.
So Uncle Sam after you have taken all the risk and the storm clouds dissipate why sell. The American people made an unprecedented bet. Now they may be cashing out too early.
George Gutowski writes from a caveat emptor perspective. Follow his twitter feed @financialskepti
- Uncle Sam Should Unload More AIG Shares (247wallst.com)
- AIG to Buy Back Up to $3B of its Stock from the Treasury (wallstreetpit.com)
- Analyst to AIG Investors: Curb Your Enthusiasm! (blogs.barrons.com)
- Treasury Selling $4.5 Billion More In AIG Shares (247wallst.com)
- AIG Will Still Be Majority Owned by Tax Payers (blogs.wsj.com)