The U.S. Department of Treasury rolled out the third phase of
divesting its stake in
General Motors Company
) as part of its plan to dispose of remaining shares of the
automaker by April 2014. The Treasury currently holds 101.3
million shares or 7.3% stake of the company, down from 500.1
million or 33% it had after General Motors' initial public offer
(IPO) in Nov 2010.
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
The U.S. government took over a 61% stake 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. After the bankruptcy restructuring, General Motors'
remaining assets were put into another entity called Motors
Thereafter, 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 Motors.
In December last year, 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
In January this year, the Treasury Department 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 billionin an
underwritten public offering.
In August, the Treasury raised another $811.1 million by
selling the shares of General Motors. 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.
Following the announcement, the share price of General Motors
increased to $37.35 from $37.19 at the beginning of the trading
session. However, the stock slid to $36.95 by the end of the day,
resulting in a loss of 0.65%.
General Motors currently carries a Zacks Rank #3 (Hold).
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