AIG's Benmosche Brings Out the Guns
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Robert Benmosche, American International Group's (NYSE: AIG) CEO, has been rather restrained as of late. The usually outspoken executive has been scolded in the past for comments and outbursts which draw negative attention to a company already in negative territory with Main Street.
Well no more.
According to the WSJ this morning, Benmosche is striking back against several Wall Street banks who wrote negative research reports on the company. These were the same banks who helped to underwrite AIG's massive stock sale in May.
Benmosche has complained to senior execs at the banks that they may not understand the company and its intrinsic value. But it's not just a bunch of hot air coming from Benmosche; AIG is planning another equity offering at the end of the year, and Benmosche has said he's already considering switching one of the four banks originally picked to underwrite the deal.
But is it the right thing to do? Are we back to 2008-09 already? The move underscores how firms feel pressured to publish rosy research reports in order to score lucrative underwriting deals and advise on mergers. The WSJ notes that 10 top firms on Wall Street paid a total of $1.4 billion to settle regulatory allegations that the firms were issuing overly-optimistic reports on companies to win business.
Benmosche also noted that his choice of bankers will extend beyond just the relationship held with AIG execs; other considerations on the banks include "stock research, investment bankers' understanding of the company and an analysis of which buyers in AIG's May offering ended up holding the shares and which ones "flipped," or quickly sold, them after the deal."
Sources noted the Benmosche didn't demand that firms publish positive research, just fair research. Sure. It's a sticky situation, as Benmosche can't persuade analysts for positive notes, and analysts can't alter research in order to win business. The drawback is that the better AIG does, the better the U.S. does, and the better taxpayers who helped bail out the insurer with do.
On the sale, the U.S. Treasury is looking to recoup more of the $41.7 billion stake it has in AIG, amounting to 77 percent ownership, when it paid $28.73 per share. Currently, the position is worth $33.5 billion about 20 percent less. AIG has slipped 21 percent since the May offering, compared with 12 percent in U.S. markets, and 23 percent for a select basket of insurance stocks, according to the WSJ.
AIG is trading flat early Friday.
Well no more.
According to the WSJ this morning, Benmosche is striking back against several Wall Street banks who wrote negative research reports on the company. These were the same banks who helped to underwrite AIG's massive stock sale in May.
Benmosche has complained to senior execs at the banks that they may not understand the company and its intrinsic value. But it's not just a bunch of hot air coming from Benmosche; AIG is planning another equity offering at the end of the year, and Benmosche has said he's already considering switching one of the four banks originally picked to underwrite the deal.
But is it the right thing to do? Are we back to 2008-09 already? The move underscores how firms feel pressured to publish rosy research reports in order to score lucrative underwriting deals and advise on mergers. The WSJ notes that 10 top firms on Wall Street paid a total of $1.4 billion to settle regulatory allegations that the firms were issuing overly-optimistic reports on companies to win business.
Benmosche also noted that his choice of bankers will extend beyond just the relationship held with AIG execs; other considerations on the banks include "stock research, investment bankers' understanding of the company and an analysis of which buyers in AIG's May offering ended up holding the shares and which ones "flipped," or quickly sold, them after the deal."
Sources noted the Benmosche didn't demand that firms publish positive research, just fair research. Sure. It's a sticky situation, as Benmosche can't persuade analysts for positive notes, and analysts can't alter research in order to win business. The drawback is that the better AIG does, the better the U.S. does, and the better taxpayers who helped bail out the insurer with do.
On the sale, the U.S. Treasury is looking to recoup more of the $41.7 billion stake it has in AIG, amounting to 77 percent ownership, when it paid $28.73 per share. Currently, the position is worth $33.5 billion about 20 percent less. AIG has slipped 21 percent since the May offering, compared with 12 percent in U.S. markets, and 23 percent for a select basket of insurance stocks, according to the WSJ.
AIG is trading flat early Friday.
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