John Paulson has trouble letting go. He refused to give up hope when his stake in Allergan, this his biggest investment, fell double-digits last year. In the slow-motion meltdown following Valeant Pharmaceuticals' late-2015 implosion, Paulson & Co. not only held onto its shares but added more, riding the drugmaker's 95 percent decline down to its nadir, where it has remained.
But it's a different story when it comes to AIG, where having a seat on the board evidently makes Paulson comfortable parting ways with half his fund's stock in the company without feeling too much remorse. And his timing wasn't bad:
Shares in AIG dropped 9.4 per cent on Wednesday after a $3bn quarterly loss raised fresh concerns about the insurer’s recovery efforts and the disclosure that hedge fund Paulson & Co almost halved its stake – even though it has a seat on the board.
A day after AIG disclosed its third loss in six quarters, chief executive Peter Hancock told investors that the company was lowering targeted returns this year, citing lower income from investments.
Over the course of the same quarter that AIG hemorrhaged billions, Paulson reduced his stake by 46 percent, or about $300 million, managing to at least partly avoid Wednesday's 9 percent loss after the earnings dropped. Good for him! But about that board seat...
Mr Paulson had been one of AIG’s top 20 shareholders. As a result of the sale, his fund had become the 38th biggest, according to Bloomberg data, with a 0.48 per cent stake as of the end of the year.
It is unusual for activists to sell stakes while on the board. Activists tend to stand aside before selling down. Mr Paulson would not comment.
Now, Dealbreaker doesn't have access to any material nonpublic information about Paulson & Co.'s investment decisions. There are undoubtedly several perfectly innocent reasons why an activist investor in a Fortune 500 insurer would slash his stake in the company while simultaneously sitting in on board meetings and helping to direct corporate affairs there. Surely, these explanations exist. They can, without question, be definitively enumerated. No doubt.
Anyway, we look forward to reviewing Paulson's next 13F.