American International Group which last week closed a $20 billion capital raising, may need to again tap capital markets to bolster its balance sheet, according to a Citigroup Global Markets research report.
Shares dropped more than 5 percent in early trading on Wednesday, falling as far as $34.63, near an almost 10-year low.
Citigroup cut the target price for AIG stock to $41 from $47, and rates the stock "hold/speculative," according to the note from analyst Joshua Shanker.
AIG raised more than $20 billion with the sale of equity, debt and convertibles, in the wake of posting a record $7.8 billion loss in the first quarter.
"Despite the new funds, it is not clear that AIG's capital position is sufficient, as we believe it merely adds capital sufficiency for (unit AIG Financial Products) without increasing former capital adequacy to the holding company," Shanker said.
AIG's loss was largely the result of a costly write-down to the market value of a derivatives portfolio held by AIG Financial Products, linked to subprime mortgages.
Shanker said losses, and the subsequent capital raise, had undermined confidence in AIG management.
Chief Executive Martin Sullivan needs to "act quickly and decisively" to get AIG back on a stable, and profitable track, he added.
AIG shares have fallen sharply as investors have grown increasingly concerned over bad mortgage bets.
The shares are trading at nearly half their value a year ago, closing at $36.62 on Tuesday.