Just a quick post for folks playing along at home. I won’t give you my thesis but my take is its time to take our huge profits in AIG. We recommended it here when it was unpopular in the $30s and I’ve taken my position off the table. My simple reasoning is that you should have stayed in the stock until Jan 13, 2011 when they issued warrants to shareholders on record. These warrants will allow shareholders to buy the stock at $45, whenever we want for UP TO 10 YEARS!!!
After that Jan 13th, sell the stock because they are beginning a recapitalization program. To me this is just a fancy term meaning they have to pay the US Government (technically Treasury) back. To do this AIG will take the US Treasury’s preferred shares and convert that into 1.7 billion shares of common stock. This will dilute OUR shares and likely drive the stock DOWN into the low $40 range. More new shares means my shares are now a smaller amount of the whole pie...people don't like that. That's why AIG is giving you warrants to stick around or comeback.
This is why I sold on Jan 14 and locked in those juicy profits. I hope to receive warrants because I was a shareholder as of Jan 13. I anticipate the stock price dropping and I will have to mark a new entry point on when I want to buy back into AIG which will eventually be a company free of government money in the near future. In the meantime I will still have warrants for the next 10 years that allow me to buy this story back in the event it takes off. (Kinda like a break in case of emergency that the stock took off w/o you)
Wish me luck and let’s hope this works. I will keep you posted on the warrants. And now I am wondering if this stock is available to be shorted on the ride down.
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