Here are a couple updates on AIG, courtesy of John Carney of ClusterStock.
Citi Says AIG May Be Worth Nothing
You may have forgotten that America’s deepest money pit, also known as AIG, is still publicly traded somehow. In fact, they did a 1-for-20 reverse stock split a week or so ago. Since then the financial calamity manufacturer has lost half its value.
So what should AIG be worth? Our feeling is that this company has so little knowledge about what its been doing that investors would be crazy to put a dime into it. Every few months we learn of a new toxic product line AIG dealt to others. First it was credit default swaps, then stock-lending and now some mysterious derivatives sold to European banks.
Citi analysts recently said that there’s a good chance that AIG could be worth nothing at all.
“Our valuation includes a 70 percent chance that the equity at AIG is zero,” said Citi analyst Joshua Shanker. The problem is that AIG owes so much to the US government that it would need to raise $135 billion before shareholders ever see a dime.
Doug McIntyre offers a contrarian take on AIG, noting that its current market cap is so low that buyers could actually make out. "With any luck, there will be a sliver of value left over for common shareholders. It is a big bet, but one that could pay off. If the equity in the company ends up being worth only $3 billion, investors could almost double their money based on where the stock trades now," he writes.
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AIG Wants To Pay Financial Products Group $235 Million In Bonuses
Uh oh. Here we go again.
From The Associated Press:
After its bonus payments ignited a firestorm of criticism earlier this year, American International Group is asking the federal government to weigh in on the insurer’s plan to resume paying millions in promised retention incentives next week, according to media reports.
AIG, once the world’s largest insurer, has asked the Obama administration’s compensation czar, Kenneth R. Feinberg, to approve the payments in order to head off any public outrage, The Washington Post reported Thursday evening.
While the company isn’t required to get the government’s blessing because the payments are actually for 2008 employment contracts, the newspaper said executives are reluctant to move forward with installments coming due next week without official approval.
Feinberg has the power to reject pay plans he deems excessive at companies which benefited from large infusions from the government’s $700 billion bank bailout fund. Feinberg also has authority to review compensation for the top 100 salaried employees at those firms. AIG is among the companies whose pay practices the government now oversees.
New York-based AIG remains the focus of intense scrutiny, after becoming one in a string of corporate calamities and a touchstone for public fury. The huge volume of credit default swaps — a form of insurance against bond defaults — sold by AIG, coupled with rising levels of defaulted mortgage and other debt, threatened the company’s existence and prompted the government to step in.
Government aid to AIG totals about $180 billion.
The $450 million in bonuses that AIG allocated in 2008 for employees, including to traders in the financial products unit that brought it to the brink of collapse, fueled public and congressional outrage. The first installment of those payments earlier this year sparked legislation in Congress to slap punishing taxes on big bonuses at AIG and other companies bailed out by taxpayers, though the Senate didn’t act on that plan.
See Also:
5 Old Ads AIG Doesn’t Want You To See
