Archive for May, 2011

AIG stock dips after $8.7 billion share sale

Wednesday, May 25th, 2011 | Finance News

NEW YORK (Reuters) – Shares of American International Group Inc fell 4 percent on Wednesday as investors recognized that the U.S. government's exit from the insurer could take a long time.

The U.S. Treasury sold 200 million shares, or 15 percent of its AIG stake on Tuesday, but still has 77 percent ownership of the insurer and another 1.5 billion shares to sell before it is fully out of its investment.

"The fact remains that the Treasury now has 77 percent and they are going to have to sell that," said Standard & Poor's equity analyst Cathy Seifert. Seifert has a "buy" rating on the stock but said that there is still "a fair amount of risk embedded in the AIG turnaround story."

Two and a half years ago, AIG was on the brink of bankruptcy. Now, after government bailouts totaling $182 billion, Washington is beginning to get its money back.

The question now is how quickly it will be able to sell its remaining 1.5 billion shares and whether the investment, overall, will be profitable.

There is also a question of how much of the beleaguered insurer's stock investors want. "The government has the political ambition and intention to reduce its holdings to zero," said Joseph Schuster, founder of IPOX Schuster LLC, but added: "The stock needs to be absorbed by the market."

Chief Executive Officer Robert Benmosche has said he expects the government to be out of its AIG position by mid-2012. Fitch Ratings said recently its own models for the company assume the government is out by the end of 2012.

A Treasury official said on Tuesday night that there was no specific timetable for the exit. He said that a full accounting would have to wait until the Treasury completes its exit, but he said he was hopeful the government would break even.

The government did not rescue AIG with the intention of turning a profit but to stem a worsening financial crisis in late 2008.

So far, the government is in the money: Tuesday's share sale, which included 100 million shares sold by AIG, came at $29 a share, higher than the average price of $28.73 the Treasury needs to break even and at a 1.6 percent discount to Tuesday's close.

Tuesday's sale helps Treasury move closer to its break-even, and it raised $5.8 billion against the $47.5 billion needed -- but, broadly speaking, AIG's shares have been trending downward. Over the course of the year, they have lost about 45 percent of their value.

AIG shares closed down 4 percent at $28.28 on Wednesday on the New York Stock Exchange.

Demand for AIG shares has not been as strong as some originally thought. The Treasury and the company agreed only earlier this month on the size of Tuesday's offering but banking sources suggested earlier this year that the share sale could raise $10 billion to $20 billion.

Underwriters on the offering were led by Bank of America Merrill Lynch, Deutsche Bank Securities, Goldman Sachs & Co and JPMorgan.

(Reporting by Clare Baldwin; Editing by John Wallace, Gary Hill)


Australia’s Keating, Costello touted for IMF job

Wednesday, May 25th, 2011 | Finance News

SYDNEY (AFP) – Former Australian prime minister Paul Keating and ex-treasurer Peter Costello are both understood to be interested in heading the International Monetary Fund, a report said Thursday.

French Finance Minister Christine Lagarde is the front-runner for the post, receiving wide European backing, after Dominique Strauss-Kahn quit following his arrest on charges of attempted rape, which he denies.

Keating and Costello's reported interest came as the biggest emerging economies in the IMF said it was time to abandon the "obsolete unwritten convention" that a European leads the organisation.

Australia has made clear it believes the IMF's legitimacy will be undermined if it is again perceived to have appointed someone to the top job based on nationality rather than merit.

The Sydney Morning Herald said that Keating, a reformist former treasurer under Bob Hawke before serving as prime minister from 1991 to 1996, would run if approached by current Treasurer Wayne Swan.

"It's the only job that would interest him," the paper cited a confidant as saying.

"It's a job quintessentially crying out for political leadership and common sense. It needs to be someone who can broker deals between the US and China.

"If Swan approached Paul seriously with some weight behind him -- with the support of some of the major non-European countries -- I think Paul would be interested."

Keating is currently a Visiting Professor of Public Policy at the University of New South Wales.

Costello, who was treasurer from 1996 to 2007 -- the longest serving in Australian history -- has yet to nominate himself but is a staunch believer in breaking the European stranglehold on the job that stretches back to 1946.

"Australia should be leading the push for the nations outside Europe to have a representative say in the IMF and to have the IMF reformed to represent the world in the 21st century as opposed to the world of 1946," he said.

The conservative opposition's foreign affairs spokeswoman, Julie Bishop, has been lobbying for Costello to be put forward, saying he was a standout choice.

"I have suggested Peter Costello because he has the track record and the qualifications and I'm confident that, if asked by the Australian government, he would accept," she told the Herald.

Costello was a part-time governor of the IMF for almost 12 years.

European nations hold close to one-third of the IMF's votes and the United States nearly 17 percent, while Asian nations hold around 20 percent with the rest held by other countries.


Tesla rolling out more stock to fund ‘Model X’

Wednesday, May 25th, 2011 | Finance News

NEW YORK (AFP) – Tesla Motors announced plans on Wednesday to offer another 5.3 million shares in the US electric carmaker to the public to help fuel development of another model.

The Palo Alto, California-based Tesla, which was founded in 2003 by Elon Musk, a co-founder of PayPal and SpaceX, said it is also granting up to 795,000 shares of common stock to its underwriter at $26 a share.

In addition, Tesla said Musk, the company's chief executive, plans to buy 1.5 million shares directly from Tesla in a private placement and Blackstar Investco, an affiliate of Germany's Daimler, plans to purchase up to 644,475 shares.

Tesla hopes to raise $214 million from the various operations and plans to use the money to fund development of a Model X crossover vehicle.

In a filing with the US Securities and Exchange Commission (SEC), Tesla said it plans to produce a prototype of the Model X by the end of 2011 and to begin selling the vehicle in the fourth quarter of 2013.

Tesla said it is seeking with the Model X to "incorporate the functionality of a minivan with the consumer appeal of a sports utility vehicle."

Tesla's first car was the Tesla Roadster, a high-performance sports car.

The Tesla Roadster costs more than $100,000 and can go nearly 250 miles (400 kilometers) on a single charge.

In the SEC filing, Tesla said it had delivered around 1,650 Tesla Roadsters to customers in over 31 countries and would end production of the car in December.

Tesla is currently developing a four-door sedan known as Model S. The Model S, expected in 2012, has an anticipated base price of around $50,000.

Tesla conducted an initial public offering in June of last year, raising $226 million.

Tesla shares gained 8.46 percent on Wall Street on Wednesday to close at $28.98.