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The other angle to this whole thing especially when you consider downside protection is the buybacks

AIG book value is about $65 per share
You need to have the shares at $60 per share to not lose money on these warrants

But AIG has shown themselves to buyback shares aggressively (they have one of the highest buy back yields of any company in the S&P right now)

Why is this important? I believe AIG will continue to buy back shares at market prices below book value which means that every year they will go into the market with the Free cash flow they produce (which may be as high as $8 billion) and buy back shares which further increases book value per share - so you have a built in safety valve to the warrant - if the market does not want to recognize AIG at a price to book of 1 to get to $60 then AIG will pull up the book value/share with buybacks which over an 8 year period may get us to $60 even at a price to book of 0.5. The companies entire market cap is $55 billion ==== they have an earning power value as high as $8 billion $8 billion x 8 years = 64 billion --> this type of cash can really make a difference even if only a portion is going to buybacks. THis is another reason why I see downside protection to this warrant
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