AIG surges on speculation of fence-mending
Shares of American International Group Inc. surged Thursday as analysts speculated the company might be reconciling with former CEO Maurice "Hank" Greenberg, who could help bring private capital and other business benefits to the company.
Shares of AIG continued to climb in after-hours trading and last traded at $48.30. It finished the regular session at $47.84, up $10.15, or 27 percent. The shares have traded between $6.60 and $493.60 in the past year. AIG completed a 1-for-20 reverse stock split on July 1. More than 148 million shares changed hands, nearly seven times the 3-month average volume of 22.3 million shares.
Investor interest was fueled by the news that the company may be working to mend the strained relationship with Greenberg, who was forced out of the company in 2005 after an accounting scandal surfaced.
"It’s not just that they’re shaking hands with Greenberg, there’s a real financial value in doing that," said Bill Bergman, senior stock analyst for Morningstar Inc. "Given the fact that AIG would have access to capital and business opportunities could be had, the reconciliation is meaningful."
A company spokeswoman did not immediately return a call seeking comment.
Early this month, Greenberg agreed to pay $15 million to settle fraud charges that alleged the company had engaged in deceptive accounting practices.
Greenberg, who built AIG over his 35-year career from a small company into the world’s largest insurer, has been fighting AIG in court in an unrelated case over who controls an employee retirement fund. A judge’s decision in that case is expected by month’s end.
AIG was hit hard by the collapse of the home mortgage industry. The insurance company had divisions that originated mortgages, insured them and was heavily invested in mortgaged backed securities and other instruments tied to mortgages, Bergman said.
The credit crisis sent AIG reeling and the U.S. government rescued it from the brink of collapse with a loan bailout package worth up to $182.5 billion. The government now owns roughly 80 percent of the company.
Filed under: news by Wolf