Aaaand.... It's Gone: Tiny Tim Plans Shelving Of AIG Stock Offering After Stock Plunge Continues

Tyler Durden's picture

Remember the other most hyped up re-IPO ever, AIG (after that other Marxist-inspired, union-lubricating, channel-stuffing debacle GM)? The same company that nearly brought down the system, that insured more disaster prone garbage than even Berkshire Hathaway, which is  92% owned by the government because it wouldn't look cool if the government fully nationalized everyone after Lehman was left to die, and was subsequently eagerly attempting to buy back its toxic filth at half off prices from Goldman's Bill Dudley who just so happens works at 33 Liberty now? Well, you can kiss that goodbye: the FT reports that "AIG and the US Treasury are discussing whether to shelve or scale back plans for a large public offering this month because of the lacklustre performance of the insurer’s shares in recent weeks, people close to the situation said." You can also kiss the Treasury's boasts of a break even on its AIG "investment" - this despite 2 years of endless market levitation, forced short squeeze, margin hikes, several wars, $4 trillion in monetary and fiscal stimuli, and most certainly, the kitchen sink. "People involved said the most likely outcome of the deliberations would be for the offering to proceed at a smaller size and closer to the Treasury’s break-even point. This would allow the restructured company to provide a longer record to the market before a larger sale later this year. Shares in AIG have fallen more than 30 per cent since January 20, hitting $29.62 on Tuesday and jeopardising taxpayers’ profits on the share sale. Treasury’s break-even level is $28.73 a share and officials have been reluctant to approve an offering below that price." This likely also means that any follow on equity capital raises by AIG will be relegated to CDO issuance and other "silly paper" that will be bought only with other people's money.

From the FT:

Washington is attempting a fine balance between extricating itself from its biggest bail-out as quickly as possible and avoiding realising a loss. AIG, led by chief executive Robert Benmosche, is keen to re-establish itself as a normal listed company but is also wary of pushing down further the value of its stock with a low-priced offering.

At Tuesday’s closing prices, the Treasury’s 92 per cent stake in AIG was worth $49bn, a slim premium over its $47.5bn cash investment. The government is planning two large stake sales this year but it is likely to retain some stock into 2012.

AIG has also said it would sell equity when the Treasury begins its share sales in an attempt to raise fresh capital and rebuild its shareholder base after most shareholders were wiped out by the company’s near collapse.

That said, every single time the government is forced to divest a stake the market somehow miraculously vaunts higher as if on nothing but Fed manipulation: kinda like what has happened this week (although the number of trade tickets for ES purchases via Citadel is running low at the FRBNY or so we hear). So anyone out there hoping to see a dip, forget about it: State Street and BoNY have their marching orders to sequester any existing shorts and make sure that the short interest in the NYSE drops to a fresh all time low, even as the Chairsatan pumps a cool $10 billion a day in the market.... because of the wealth effect of course.