As per the statement of the US Treasury Department, it has expectations to raise an amount of $5 billion from the sales of stocks of American International Group, Inc.(NYSE:AIG), reducing the stakes of the government to 55%.
The sale of stocks is expected to bring a profit of $300 million to the US treasury. This comes at a moment when President Barrack Obama is campaigning for a second term. He has been compelled to defend the decision of his administration to use taxpayer money to support companies during crisis.
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The US Treasury Department has priced the offering at $30.50 per share, which is 6% above the $28.72 required by the government to make things even with its investment. AIG seeks to purchase up to $3 billion of the offering.
As per reports, government has already sold off three tranches in AIG more than than the break even price. This has put the Treasury on track to gain when it exits the insurer. Treasury has stated that it would not sell stocks below the break even level.
It is expected that the sale of 163.9 million AIG shares will help in decreasing government’s holding in the insurer from 61% to 55%. The offering is scheduled to close next week.
The insurer has received a number of bailout under the administrations of Obama and Bush. After the most recent sale, the investment of the Treasury in AIG is predicted to be $25 billion.
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Administration under Obama has been slowing down owing to the politically detested financial crisis bailout programs. This has resulted in more than 300 minor banks to repay taxpayers. The administration could have decided to sell its remaining stake in AIG this year but it has stuck to its decision of not acting for political reasons.
AIG shares had closed up at 1.62% at $31.34 as of Friday.