What Investors Can Learn From the Collapse of AIG

August 8, 2008 at 1:49 am | Posted in economy, USA | Leave a comment
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From a high of $72 in early 2007, AIG has now collapsed to just $24.40. That follows an eye-watering plunge today, following dismal second-quarter results and some fears about the balance sheet.

Mr. Greenberg, of course, retains a very large stake in the company. The shares he kept have, of course, plummeted along with everyone else’s. But his sales still saved him, and his family, hundreds of millions in further losses.

The unhappy investors who bought his shares aren’t the only ones crying. AIG raised $20 billion in new money in May to shore up its balance sheet. That included selling new shares for $7.5 billion. Those who invested have already lost $2.7 billion, or more than a third of that, due to the collapse in the stock price.

AIG has become blotting paper, soaking up investors’ money. Over 10 years, they have actually lost half their stake.

And they haven’t even had the offsetting comfort of fat dividend checks along the way. During that time AIG retained about 90% of its earnings, on the principle that the company’s management could invest the money more profitably than its shareholders.

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