AIG bottom price
July 9, 2009 2:32 PM Subscribe
Do you think AIG could really hit $0.00?
Do you think AIG could really hit 0? It is dropping so quickly. It is somewhat tempting to buy in at, I don't know, $5 or something. But what are the risks? Didn't they already declare bankruptcy? What else could possibly make it completely worthless or delisted from the NYSE?
Do you think AIG could really hit 0? It is dropping so quickly. It is somewhat tempting to buy in at, I don't know, $5 or something. But what are the risks? Didn't they already declare bankruptcy? What else could possibly make it completely worthless or delisted from the NYSE?
Plenty of people said the same thing when Citigroup hit 5 bucks back in January. C is currently sitting at 2.69.
posted by JaredSeth at 2:37 PM on July 9, 2009
posted by JaredSeth at 2:37 PM on July 9, 2009
Response by poster: Can you short a stock on the same day? Borrow the shares at 9 AM, pay them back or whatever they call it, at 2:30 on the same day?
posted by Penelope at 2:42 PM on July 9, 2009
posted by Penelope at 2:42 PM on July 9, 2009
The recent goings-on in the financial markets (and in governments and other institutions responding to them) are unprecedented. AIG is at the center of all that. It's safe to say that its stock price could do anything, and that previous behavior of AIG or other stocks is not necessarily a good predictor of future behavior of AIG in these circumstances. I'd say you're talking about playing roulette. Possibly the Russian variety.
posted by madmethods at 2:50 PM on July 9, 2009 [1 favorite]
posted by madmethods at 2:50 PM on July 9, 2009 [1 favorite]
I strongly considered doing this with Citi last year, and am very glad I did not. Shorting exposes you to much greater downside risk than a standard purchase, because you're on the hook to pay back the short at whatever price it ends up at after the term. This means that you can lose more than just the money you put in.
Citi looked doomed but limped along in no small measure as a result of political connectedness and "too big to fail" status. You should factor those things into your estimate of the probability that AIG will zero out.
posted by shadow vector at 2:51 PM on July 9, 2009
Citi looked doomed but limped along in no small measure as a result of political connectedness and "too big to fail" status. You should factor those things into your estimate of the probability that AIG will zero out.
posted by shadow vector at 2:51 PM on July 9, 2009
Buying a complex derivative you don't understand is Russian Roulette - buying a stock of a company that might go bust is simply a guess that the expected value of a rebound in the stock's value outweighs it becoming worthless.
If the stock is sufficiently cheap, it might be worthwhile to buy a small amount for a potentially large upside.
posted by Spacelegoman at 2:55 PM on July 9, 2009
If the stock is sufficiently cheap, it might be worthwhile to buy a small amount for a potentially large upside.
posted by Spacelegoman at 2:55 PM on July 9, 2009
Didn't they already declare bankruptcy?
No, I don't believe they have. I haven't been able to find anything online saying they've filed for bankruptcy...yet.
And even if they had, it can be several months between the time bankruptcy is filed for and the time the time the details of any reorganization are worked out, including whether the stock becomes worthless or not. For example, Delta Airlines filed for bankruptcy in September 2005, but the stock continued trading (on the NYSE for about a month until it was delisted, OTC after that) until March 2006, when it was announced the existing stock would be cancelled as part of the reorganization.
posted by DevilsAdvocate at 3:05 PM on July 9, 2009
No, I don't believe they have. I haven't been able to find anything online saying they've filed for bankruptcy...yet.
And even if they had, it can be several months between the time bankruptcy is filed for and the time the time the details of any reorganization are worked out, including whether the stock becomes worthless or not. For example, Delta Airlines filed for bankruptcy in September 2005, but the stock continued trading (on the NYSE for about a month until it was delisted, OTC after that) until March 2006, when it was announced the existing stock would be cancelled as part of the reorganization.
posted by DevilsAdvocate at 3:05 PM on July 9, 2009
Get the research report and read it. One experts opinion is that there is a 70% chance it gets to 0. But then, opinions are like ...
posted by fistynuts at 3:54 PM on July 9, 2009
posted by fistynuts at 3:54 PM on July 9, 2009
Shorting exposes you to much greater downside risk than a standard purchase, because you're on the hook to pay back the short at whatever price it ends up at after the term. This means that you can lose more than just the money you put in.
Oh please. This is what brokerage orders prevent. Trading (both short and long) without orders is like driving without brakes -- any fool knows not to do it.
posted by randomstriker at 5:11 PM on July 9, 2009
Oh please. This is what brokerage orders prevent. Trading (both short and long) without orders is like driving without brakes -- any fool knows not to do it.
posted by randomstriker at 5:11 PM on July 9, 2009
It's definitely roulette, but there's a ton of upside. Just don't invest more than you're willing to lose entirely. Like others said, we are in unprecedented times, so trying to use reason to figure out what will happen is impossible.
Just for kicks, I bought a small amount of Bank of America at $5.00. I mostly did it because I was sick of hearing about the big banks getting bailed out at the expense of taxpayers. Now I'm a stockholder, so whenever Bank of America gets handed more money, I can rub my hands together and say "Excellent" in my best Monty Burns voice.
posted by diogenes at 5:44 PM on July 9, 2009
Just for kicks, I bought a small amount of Bank of America at $5.00. I mostly did it because I was sick of hearing about the big banks getting bailed out at the expense of taxpayers. Now I'm a stockholder, so whenever Bank of America gets handed more money, I can rub my hands together and say "Excellent" in my best Monty Burns voice.
posted by diogenes at 5:44 PM on July 9, 2009
I have some Enron stock. On the parchment certificate paper. Lesson: Stocks do sometimes go to $0.00. It looked like this: September, about $90; December, zero!
posted by Houstonian at 5:51 PM on July 9, 2009
posted by Houstonian at 5:51 PM on July 9, 2009
This may go without saying but I'll second diogenes: don't invest more than you're willing to lose entirely. That way, even if you do buy and it does tank (well, tank more than it already has), you won't be SOL.
posted by carpyful at 1:49 AM on July 10, 2009
posted by carpyful at 1:49 AM on July 10, 2009
@diogenes: not to nitpick, but you should really be tenting your fingers, not rubbing your hands together.
posted by Cogito at 1:19 PM on July 10, 2009 [1 favorite]
posted by Cogito at 1:19 PM on July 10, 2009 [1 favorite]
This thread is closed to new comments.
posted by box at 2:35 PM on July 9, 2009