Saturday, August 22, 2009

"AIG Shares at it Again. Up 33%"

The retail investors seem hot and bothered over AIG shares today. They’re up more than 33% just after noon. AIG has been on a tear since Aug. 5, when its shares jumped 63%. Volume surged by 1600%, to 134.9 million from the prior day’s 7.9 million. (No typo.) We still don’t know exactly what stoked flood of interest, although the conventional wisdom was that a short-squeeze and retail-led pile on ahead of AIG’s earnings got it going. Since AIG’s Aug. 4 closing low, the government-controlled insurer is up about 150% just before noon today.

There was a little news on the company that might explain some of the renewed attention to the shares. For instance, AIG named a couple executives for its U.S.-based life insurance and retirement services businesses. But that was part of an ongoing leadership reshuffle, and it hardly seems important enough to drive the shares up to where they are.

The only other thing we can find is a Bloomberg interview with AIG’s recently named CEO Robert Benmosche. The money quote: “We believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well.” Not exactly a hugely reassuring comment for shareholders.

Just one note of contrarian context on the AIG share surge. A 150% move in a couple weeks seems impressive. But don’t forget that the company’s stock underwent a 1-for-20 reverse split in early July. Applying that algebra to AIG’s shares at their recent peak in September 2008 would have made one share worth $455.20. From that perspective, AIG long-term stock chart is still decidedly ski jump-shaped, with shares having lost roughly 93% of their value.

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