General Motors Company
) failed to uphold the increase seen last week after the U.S.
Treasury revealed that it has recovered $570.1 million of its
bailout loan to the company. The recovery came from the
Treasury's sale of the company's shares in September.
The amount raised by the stake selling in September took the
Treasury's total recovered amount of General Motors' bailout to
$36 billion. As a result, the department's stake in the automaker
reduced to 7% from about 61% taken in exchange for the bailout
under the Troubled Assets Relief Program (TARP).
The Treasury announced the third phase of divestiture of its
stake in General Motors on Sep 26. As of that date, the Treasury
held 101.3 million shares or 7.3% stake of the company, down from
the 500.1 million or 33% it had after General Motors' initial
public offer (IPO) in Nov 2010. The fast pace of the sell-off by
the Treasury indicates that it might divest its entire stake in
the company before its deadline of Apr 2014.
The Treasury department provided a bailout loan of $49.5
billion to General Motors following its bankruptcy in 2009. Post
bankruptcy, the company was primarily owned by the U.S. and
Canada governments, and the UAW retiree health care trust
In Nov 2010, General Motors initiated an IPO of common stock
that helped it repay $23.1 billion to the U.S. government. The
Treasury was left with roughly 500.1 million shares of General
In Dec 2012, General Motors repurchased about 200 million
shares from the U.S. government for $5.5 billion, leaving nearly
300 million shares with the Treasury. Post-sale, U.S. Treasury's
stake in the company was reduced to nearly 18% from 26.5%.
In January this year, the Treasury initiated a plan to sell
the remaining shares by next year and hired
JPMorgan Chase & Co.
Morgan Stanley & Co.
) for conducting the sale. The department revealed that the banks
will get a penny for every share they sell, for a fee of up to $3
In the first part of the pre-arranged trading plan, which was
completed on Apr 11, 2013, the Treasury sold 58.4 million shares
of General Motors for $1.6 billion. Thereafter, in June, the
department sold another 30 million shares for $1.03 billion in an
underwritten public offering.
In August, the Treasury raised another $811.1 million by
selling the shares of General Motors. As of Sep 26, 2013, the
department had recovered $35.4 billion of the amount it spent on
the company via repayments, stock sales, dividends, interest, and
other income by the end of August.
Apart from General Motors, the Treasury department is
recovering the money spent on other companies under TARP as well.
It has recovered almost $404.9 billion or 96% of the $420.92
billion spent under the program. In fact, the department has made
a profit of $1.58 billion under TARP, after including the
additional income made from the beneficiary companies. However,
the treasury expects to incur losses of $15 billion on the total
bailout money ($85 billion) spent on the automobile industry.
Following the uptick, the stock price of General Motors
dropped 0.06% to $35.33 on Oct 14, following reports that the
company increased the price of two of its full-size pickup
trucks, 2014 Chevrolet Silverado and GMC Sierra, by $1500.
General Motors currently carries a Zacks Rank #2 (Buy).
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