Trading The AIG IPO (AIG, MS, GS)

AIG AIG is getting closer and closer to becoming an entire publicly traded company again, and the underwriters of the "re-IPO" will reap billions in profits and fees, as it's the "largest share offering in the history of humankind." The Treasury, whill own 92.1% of AIG after a recapitalization deal. This will lead AIG to take a $3.6 billion charge this quarter, but the secondary share offering is where the money is going to be made. Expected in May, the offering could be well north of $10 billion according to sources close to the situation. Banks are fighting for their slice of the pie, and the CEOs are in Washington this week to plead their case. AIG Chief Executive Robert Benmosche was positive on the recapitalization. "We have to think about the need to do a capital raise and improve liquidity," Benmosche said in an interview. Both the Treasury and AIG will sell shares in the May offering. AIG will sell around $3 billion worth of stock. Despite the small fee for the IPO, which is expected to be 75 basis points, this could be worth hundreds of millions to the banks, and is a short term trading idea for whoever is the lead underwriter on the deal. Bank of America BAC, J.P. Morgan JPM, Goldman Sachs GS and Morgan Stanley MS are all in Washington this week, and traders could take a hedge approach, having a bigger position in the name they believe will win, while having smaller long positions in the other names. Buying the financial sector ETF XLF could also capture some upside from this news. Disclosure: no position in names mentioned