AIG IPO: Opportunity Missed or Crisis Averted?
A few days ago, I received an email from E-TRADE that my brokerage account there qualified me to participate in AIG’s latest public offering. The government is beginning to sell its stake in the company, and this would be a unique opportunity to purchase stock not usually available to most people. IPOs have a history of paying off big for investors who get in early.
I looked into the details of the offering, and I decided to place an order for 50 shares, the minimum, at a price a few dollars lower than the expected offering price. Not surprisingly, there were enough interested buyers at higher prices, so I didn’t make the cut when the stock price opened at $29 a share. At the time I’m writing this, the price per share has already dropped 3.3%. The government has still has a significant portion of equity, 1.5 billion shares, to release to the public over the next few years, and they’re betting on a profit.
This may have been a missed opportunity on my part. If I had bid $29 for my 50 shares, I still wouldn’t have been guaranteed to qualify; bigger sharks feed first. However, I priced myself out of the running by not being confident about the valuation the market placed on AIG. If AIG continues to struggle, however, I may have done the right thing.
What would you have done?
Article comments
this could be a case of the best move being none. i would not fret over missing out. only time will tell, but i am betting whatever you did or will do with that same money will do better for you.
I think you dodged a bullet on this one, but who knows in the end. After having my portfolio taken down by AIG, particularly with that reverse split, I won’t be touching them at all.
How did the reverse split take down your portfolio?
I am thinking you averted a crisis. AIG has yet to prove that it can perform as an insurance company and has a poor history of pricing its policies over the last 2 years. I would call it an incredibly speculative stock and suspect that you can get in at a much cheaper price.
According to “The Four Pillars of Investing” (Bernstein), IPO investors historically receive horrible returns. If you’re looking for something that beats the SP500, invest in a small value index.
Be grateful that you missed out! Under normal conditions, you would need a much bigger position in an IPO to make money.