Government Stake In General Motors To Be Sold

The U.S. Treasury Department announced that the government would be selling its stake in General Motors back to the car manufacture in the coming year.

According to Reuters, the two-step process that includes a $5.5 billion stock sale to GM - is part of a broader push to wind down the controversial financial bailout under the Troubled Asset Relief (TARP) program. TARP was created by former President George W. Bush to prevent the collapse of the U.S. banking industry during the 2007-2009 financial crisis.

GM was awarded %50 billion in the government bailout of the auto industry in exchange for stock. The Treasury Dept. says they have recovered about $28.6 billion back from GM and after selling its stake at around $30 a share, they will have recovered nearly $38 billion leaving the government taking a $12 billion loss. The government would have need to sell its 200 million shares at the average price of $69.72 a share to break even. At the close of the market on Wednesday, GM shares were being sold at $27.31 a share.

“GM wins,” Jefferies analyst Peter Nesvold said, pointing to the elimination of the government stake that has been acting as a drag on the stock price and to eventual higher earnings per share. “From a government standpoint, it’s a mixed bag, but they went into it to save jobs, not as an investment.” He said the buyback was lower than the $30 a share he had expected at the very least and was occurring earlier than anticipated.

“This is very attractive to the company, to our shareholders,” GM Chief Financial Officer Dan Ammann told reporters at GM’s Detroit headquarters. “It obviously brings some clarity and certainty around the U.S. Treasury exit.

“It’s obviously good for the business in terms of continuing to remove the perception of government involvement in the company, which is going to be good for sales,” Ammann said.

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