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For Immediate Release
Chicago, IL – September 12, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include American International Group Inc. (AIG - Analyst Report), Deutsche Bank AG (DB - Analyst Report), Goldman Sachs Group Inc. (GS - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report) and Citigroup Inc. (C - Analyst Report).
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Here are highlights from Tuesday’s Analyst Blog:
Treasury Puts $18B AIG Stock for Sale
Following American International Group Inc.’s (AIG - Analyst Report) decision to buy back shares worth $5.0 billion in the next U.S. Treasury stock sale, the Treasury initiated the sale of $18.0 billion worth of stock in the company.
In its fifth round of stock sale, the Treasury intends to sell about 553.8 million shares for $18.0 billion, at $32.50 a share, which is well above the Treasury’s break-even of $28.73 per AIG share. On Monday, AIG closed at $33.30 a share at the New York Stock Exchange, reflecting another solid gain from the latest sale.
While AIG intends to repurchase 153.8 million shares for $5.0 billion, the remaining $13.0 billion worth of stock will be raised through open market operations. In addition to the $18.0 billion stock offering, the underwriters are granted a 30-day option to buy another 83.1 million shares for $2.7 billion.
In addition, Deutsche Bank AG (DB - Analyst Report), Goldman Sachs Group Inc. (GS - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report) and Citigroup Inc. (C - Analyst Report) have been appointed as the joint global managers for the stock offering.
The successful culmination of the latest stock sale is expected to bring down the Treasury’s stake in the company to a meager 21.5% from the prior 53.4%. If the over-allotment is executed completely, it can further contract Treasury’s ownership to 15.9%. AIG has successfully shrunk the Treasury’s ownership in it from 92% in January last year to 53.4% currently, which equates to about 871 billion shares totaling about $30 billion.
The latest stock sale was executed last month, wherein the Treasury vended $5.75 billion of shares of AIG for an average price of $30.50. Of this deal value, AIG bought back shares worth $2.0 billion, while $3.0 billion were raised from the open market and an additional $750 million were sold to the underwriters.
Including the latest repurchase, AIG will have bought back shares worth $13.0 billion thus far in 2012. Last week, the company also disclosed its plans to utilize $2.0 billion raised from the sale of a part stake in in its Asian wing – AIA Group Limited (AIA).
The sooner-than-expected wipe-off of the Treasury’s stake helps rebound investors’ confidence in the company. At this rate, a complete liberation is expected by early 2013. However, we believe that AIG is liable to be confronted by fresh regulatory challenges from the Federal Reserve, who is the chief regulator upon the complete dilution of the Treasury’s stake.
Thus, we remain on the periphery at the moment to analyze the managerial and financial developments at AIG going forward. Consequently, we maintain a long-term Neutral outlook on AIG with Zacks Rank #2, which implies a short-term Buy rating and indicates a slight upward pressure on the stock in the near term.
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