Posted on 02 Sep 2009
Following a steady rise last week, shares of AIG dipped for a second day in a row yesterday, down 20.6 percent compared with Monday's close.
Last Friday, the stock closed at $50.23, more than triple its July 31 close of $13.14. But shares this week are down 28.3 percent from the Aug. 28 closing price, ending trading at $45.33 on Monday and $36 Tuesday. The overall Dow Jones industrial average dropped nearly 2 percent Tuesday.
Mark Lane, a principal and research analyst with William Blair & Co. L.L.C. in Chicago, said continued volatility in the stock price can be expected.
“I think there remains quite a bit of uncertainty about AIG’s value, given the lack of visibility for an improvement in credit markets,” which impacts its investment portfolio, and “their ability to divest any of their businesses successfully,” he said.
As a result, “the stock has been subjected to some marked volatility, and it’s tough to justify the sort of move we saw in August,” said Mr. Lane. “There’s still quite a bit of ambiguity associated with the valuation, and I don't think you’re likely to get a lot of clarity until well into next year, or until we have some sort of successful divestiture of some major business.”
Cathy Seifert, an equity insurance analyst with Standard & Poor’s Corp. in New York, said she believes the stock’s run-up last week was a reaction to “a lot of talking points” by new AIG CEO Robert Benmosche that “got a lot of people very enthusiastic.” Among other comments, Mr. Benmosche said he did not favor a fire sale of AIG’s assets, and that in a year people will say New York-based AIG is performing well.
“I think what we’ve seen now is reality setting back in, as it relates to common shareholders,” Ms. Seifert said.