The US Treasury made a small profit when it sold a portion of its shares in American International Group Inc on Tuesday, but it was unclear how its investment in the beleaguered insurer will ultimately fair.
The shares were sold for USD 29 apiece, just above the USD 28.73 average price the Treasury will need to break even on its record bailout of AIG during the financial crisis.
But the sale price was at only a 1.6% discount to Tuesday's closing price, which could prove scant comfort to investors who have watched AIG shares plummet 40% since the beginning of the year.
Tuesday's USD 8.7 billion stock offering, which included 200 million shares sold by the Treasury and 100 million sold by AIG itself, is far smaller than the USD 10 billion to USD 20 billion deal some banking sources had suggested earlier this year, hinting at a potential lack of investor interest.
To be sure, Treasury and AIG only agreed earlier this month on the size of the offer, and the US government did not make its investments in AIG with the intention of turning a profit. Rather, it acquired the stock under extreme duress, as the potential failure of the insurance giant threatened to exacerbate an already severe financial crisis in late 2008.
"We're hopeful that we can recover all the investment that we made," Tim Massad, the Treasury's acting secretary for financial stability said during a conference call with reporters on Tuesday.
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