By MarketWatch
NEW YORK (MarketWatch) -- Like hatchlings, American International Group Inc. and General Motors are eyeing an exit from their cozy government nest. They're also getting a nudge more like a shove.
AIG /quotes/comstock/13*!aig/quotes/nls/aig (AIG 35.55, -1.28, -3.48%) reportedly is readying a bond offering that would be its first effort to raise capital without government aid since taxpayers bailed out the insurer with $180 billion in guarantees. Separately, GM filed its initial registration for a public offering. See report on AIG offering. Read report on GM IPO filing.
Both companies have reassured investors with their most recent results. AIG posted a $1.06 billion loss, but took $4 billion in charges from a unit it sold. GM made $1.3 billion in the second quarter on revenue of $33.2 billion. Read report on GM earnings.
But are investors ready? The IPO market is dicey. Eight of the last 25 IPOs priced in the U.S. market have negative returns, according to IPOScoop.com. The market for new bonds is better for both investment grade and high-yield, or junk, issues. But few, if any, of those issues have come from companies with the baggage of AIG. See recent performance of IPOs.
AIG seems to be simply testing the waters. A failed bond issue is unlikely and probably wouldn't be much of a blow to the company. It still has ample credit from Uncle Sam. For GM, an IPO seems rushed, even if the Securities and Exchange Commission waits the full 90 days before giving it the green light.
AM Report: SEC sues New Jersey over bonds
New Jersey settled SEC charges that the state misled investors about the health of its two largest pensions while issuing billions of dollars in bonds. Peter Landers, David Weidner and David Reilly discuss. Also, Stephanie Banchero discusses a new company that allows students to bet for (or against) their grades.
GM could probably raise more in an offering if it waited a couple of quarters, as long as the automaker appears to be making the sort of headway it seemed to make in the second quarter. More time would also allow GM to address some of the troubling issues -- its inadequate internal controls, for instance -- and make a better case to investors. Read related commentary on GM's IPO prospectus.
The political reality, however, is that the Obama administration needs to show progress fast with the bailouts. A Pew Research Center poll recently found that 56% of Americans believe TARP was passed under Obama. It wasn't. But the president is on the hook. The bailout babies need to be pushed out of the nest. See Pew study.
Even if they're not quite ready.
More MarketWatch First Take
| Aug. 19, 2010 | Three more reasons to worry about economy | |
| Aug. 19, 2010 | Big premiums, but small odds for speculators | |
| Aug. 19, 2010 | Shopping, one dollar at a time | |
| Aug. 18, 2010 | GM prospectus has plenty of scary material | |
| Aug. 18, 2010 | Target takes on the recession |
David Callaway
Editor's View