market folly

As Market Folly detailed recently, Bruce Berkowitz's Fairholme Capital has filed an activist 13D on shares of AIG (AIG). At the time, their activist intent wasn't clearly outlined so we're waiting to see what Fairholme has in store in that regard. AIG and the government have proposed a solution to sell the government's stake. Fairholme Capital recently released this statement which gives us a little more clarity regarding their position size and announced their support of the proposed plan:

"Miami, FL – September 30, 2010 – Fairholme Capital Management today issued the following statement:

On behalf of our approximate 440,000 shareholders and clients, Fairholme owns approximately 24% of the outstanding common stock, 38% of the mandatory convertible bonds and other debt instruments of American International Group, Inc. (AIG).

Fairholme invested over $1.8 billion in AIG securities, more than 10% of assets under management, with the knowledge that for decades AIG was the premiere insurer - a shining example of how the United States can compete around the world. We also invested in AIG with the belief that such a past is not easily destroyed.

Nevertheless, all of us at Fairholme applaud and appreciate the yeomen's work of AIG's management and board of directors, the United States Treasury, the Federal Reserve System and its trustees and countless others involved in this most complex process.

We strongly support the proposed solution to revitalize AIG in a fair and equitable manner for all constituents, foremost our country's taxpayers, and look forward to a vibrant future for AIG and the U.S. economy.

Contact: Bruce R. Berkowitz
Founder and Managing Member Fairholme Capital Management, L.L.C."


Yesterday we also got news that Berkowitz's Fairholme is set to invest $1 billion in the IPO of AIA Group, a subsidiary of AIG. This IPO was mentioned in our recent article examining AIG's road to recovery. So it will be interesting to see what (if any) activist measures Berkowitz takes. One thing is for certain though, he is betting heftily on an AIG recovery.

For other portfolio activity, we've detailed Fairholme's MBIA stake as well as their new position in Morgan Stanley (MS).