Treasury announces GM exit strategy; taxpayers to lose billions… Uncle Sam Books 50% Loss!
Washington — The Obama administration said Wednesday it will sell 200 million shares — or 40 percent of its remaining stake in General Motors Co. — back to the automaker and announced plans to completely exit the Detroit automaker by March 2014.
The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock’s closing price on Tuesday. GM shares jumped sharply on the news and were up 6.7 percent to $27.10, or $1.59.
The U.S. Treasury — after more than a year of refusing to say when it might start selling its remaining stake in GM — said it willannounce a written plan in January to shed its remaining 300 million shares over the next 12 to 15 months — likely in a series of small stock sales.
From The Detroit News: http://www.detroitnews.com/article/20121219/AUTO0103/
A few days after divesting its stake in the firm that started it all, AIG, and at a profit at that (ignoring that the risk has merely been onboarded by the Fed whose DV01 is now $2+ billion as a result), the US Treasury continues to divest of all its bailout stake, this time proceeding to GM, where the channel stuffing firm just announced it would buyback 200MM shares from the US government at a price of $27.50. More importantly, the “Treasury said it intends to sell its other remaining 300.1 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions. Treasury intends to begin its disposition of those 300.1 million common shares as soon as January 2013 pursuant to a pre-arranged written trading plan. The manner, amount, and timing of the sales under the plan are dependent upon a number of factors.” Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government’s breakeven price of $54. So much for the “profit” spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers.
The American taxpayers stand to lose billions as General Motors today announced a plan to buy back 40 percent of the company owned by the federal government.
“The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock’s closing price on Tuesday,” the Detriot News reports.
However, the break even price — the price that GM would need to pay for each share in order to pay back the money the government put in to the company —was $53 a share. That number has now risen dramatically.