The U.S. Department of Treasury has recovered a total of $39
billion as it completed the divestment of its remaining stake in
General Motors Company
) on Monday. The Treasury department provided a bailout loan of
$49.5 billion to General Motors following its bankruptcy in 2009.
Thus, the Treasury had to incur a loss of $10.5 billion.
Post bankruptcy, Detroit-based General Motors was primarily owned
by the U.S. and Canada governments, and the UAW retiree health
care trust fund.
The U.S. government had acquired 61% stake in General Motors in
exchange for the bailout loan provided under the Troubled Assets
Relief Program (TARP). The trust fund held 17.5% and the Canadian
government held 11.7%. The remaining shares went to the
bondholders of the old company.
In Nov 2010, General Motors initiated an IPO of common stock that
helped it to 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.
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.
According to the Treasury, the bailout was one of the essential
aspects to recover the economy from recession and thus preventing
millions of job losses. The auto industry is presently recovering
with increase in demand in the U.S.
General Motors believes that this exit of government from the
company will enhance its sales, as some of the customers,
specially the pickup truck buyers, did not prefer government
Following the announcement, shares of General Motors increased 2%
to $41.17 from $40.38 at the beginning of the trading session
yesterday. However, the stock slipped to close at $40.90,
resulting in a gain of 1.8% for the day.
Currently, General Motors retains a Zacks Rank #3 (Hold).
CITIGROUP INC (C): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
To read this article on Zacks.com click here.