Photo: Business Insider
Now here’s a pickle…The Treasury has announced that it will sell $4.5 billion worth of AIG stock — $3 billion of which AIG will buy itself — at a price of $30.50.
This should be awesome, Politico’s Ben White reports, because a Treasury official says the deal is “above Treasury’s break-even on all of its AIG holdings ($28.72), TARP and non-TARP. Also, Treasury upsized the deal to $5 billion during the course of [Friday] … [it] was originally $4.5 billion offering when we went out with the initial offering release at 2:15 p.m.”
Hold the phone though. Former Special Inspector for TARP, Neil Barofsky, says that the Treasury is fudging its maths a bit. Because the Fed got involved in previous AIG sales, the actual stock price is $43.53.
Barofsky points to this note in a December 2011 TARP report to prove his point (page 3):
On May 24, 2011, Treasury sold a total of 200 million AIG common shares at $29 per share, consisting of 131,981,246 TARP shares and 68,018,754 non-TARP shares based upon the Treasury’s pro-rata holding of those shares. The non-TARP shares are those received from the trust created by the Federal Reserve Bank of New York for the benefit of the Treasury. Receipts for non-TARP
common stock totaled $1,972,543,866 and are not included in TARP collections. The realised loss reflects the price at which TARP sold common shares in AIG and the TARP’s cost basis of $43.53 per common share. However, the Treasury as a whole realised a gain on the sale of AIG shares as the combined basis for those shares is $28.73.
What do you think?