AIG was the largest insurance company in the world prior to its collapse during the financial crisis. It had to be rescued by the government which became is biggest shareholder. The government has sold its shares of AIG stock so now it is not constrained by government restrictions on executive compensation. That means that AIG's management will behave like other executives. The hedge fund manager believes that AIG management has been under reporting its earnings with the intention of reporting higher future earnings after the departure of the government. He predicts that its stock price will double as a result.
The hedge fund manager may be right or wrong in his prediction about AIG's stock price. He is right, however, in his reasoning. Managing the stock price, and increasing the value of executive stock options is what investor capitalism is all about.
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