When the government bailed out AIG in 2008 during the credit crisis by providing more than $170 Billion in taxpayer money, expectations were that the insurance company would restructure itself, and return to profitability in order to pay back the Treasury. As the company began its new IPO on March 25th, certain prices were required in the stock to ensure the government would be able to recoup its money provided three years ago.
Unfortunately, it appears that both investors and the taxpayers are the big losers in this, as the stock is down more than 3% in just a few hours after opening, and well below the threashold necessary for the Treasury to break even on its loans.
According to Dow Jones and now CNBC’s Kate Kelly, the AIG offering is due to price at $29 as underwriters supposedly have succeeded in the last minute scramble to get enough bid interest above the Treasury’s breakeven price of $28.70. That’s a $0.30 buffer. Surely this will inspire much confidence in the deep order book of institutions which despite having access to limitless zero cost cash, still barely chipped in enough to avoid major 11th hour embarrassment for Tim Geithner. – Zerohedge
Congrats To All Who Got In On AIG Offering…
…You are down just 3% in a few hours. Oh, and good luck with the remaining $41 bllion in AIG Treasury exposure (through the common) not at a loss (above $28.70) – Zerohedge
Three years after the massive bailouts by the Treasury Department, Federal Reserve, and Congressional stimulus packages, very little of the trillions spent in taxpayer money has been paid back. Fannie Mae and Freddie Mac continue to bleed cash, and have required several loans since 2008 to remain viable. Also, the government takeover of General Motors has only recovered a few billion in loan paybacks from the automaker since GM has been paying their debt to the American people through an escrow account that is made up of government money.
Like the promises made by the government in bailing out the Savings and Loan companies during the crisis of the 1980’s, money given to corporations and banks will inevitably be returned to the American people at a loss. Today’s IPO by AIG, which is down more than 3% in just a few hours of its going public, is likely to be a loser for both the taxpayers who loaned the insurance company money in 2008, and for investors who think that they are solid enough to move forward three years after the credit crisis.