The U.S. Government Unloads More GM (GM) Stock
The U.S. government recently disclosed that it had sold roughly $490 million in GM (GM: Analysis) stock last month, rapidly accelerating its divestment from General Motors, which has been constantly ridiculed as "Government Motors" after its 2008 government bailout and reorganization. Daily Chart
The exact price per share has not been released, but is estimated to be between $26.20 and $29.36, indicating that the government sold approximately 18 million shares.
This means that the government is ready to take a loss on its investment, as it struggles to make ends meet at Capitol Hill. Analysts originally estimated that the U.S. government would need to wait for shares to hit $71 per share to break even. To date, the government has recovered $29.8 billion of its $49.5 billion equity investment in GM through repayments, stock sales, dividends and interest. However, the government has been in a hurry to sell its remaining shares by early 2014, hiring JPMorgan (JPM
) and Citigroup (C
) to help conduct the sale. The banks will earn a cent for each share sold, for a fee up to $3 million. At the time of its December 2008 bailout, the three largest U.S. auto companies - General Motors, Chrysler and Ford (F
) - were saved by a $34 billion bailout - which was later increased to $85 billion, which saved the U.S. economy from enduring an estimated three million layoffs that could have pushed the U.S. deeper into a recession. Critics claimed that the "Big Three" had failed to operate effectively for years, ignoring demands for alternative energy vehicles and smaller, more fuel-efficient vehicles in favor of gas-guzzling SUVs, Hummers and pickup trucks. To revive lagging sales in 2006, General Motors launched 0% financing plans to attract buyers, in a move directly reflecting the flawed logic behind the subprime lending crisis that broke out a year later. The U.S. government also claimed that employees were overpaid - starting at $26 per hour while union members made $70 per hour - contributing to the company's top heavy collapse. Although those dark days are long over, can investors expect better times ahead? To date, General Motors has posted 12 consecutive quarters of positive margin growth and repurchased $5.5 billion in government shares last year. General Motors' top and bottom line growth has been overwhelmingly positive over the past three years, growing 12.27% and 0.34% respectively since January 2011. A recent sales forecast calls for U.S. light vehicle sales volume to grow 6.6% to 15.4 million in 2013, while global vehicle sales are expected to advance by 5%. Losses are expected to continue in Europe throughout 2013 and 2014, but those losses are expected to narrow by 2014. General Motors also has a small but growing footprint in China, where it is currently the leading foreign automaker, ahead of Ford. The Japanese earthquake and tsunami, followed by anti-Japanese protests regarding the sovereignty of the Senkaku Islands, have given both General Motors and Ford slight advantages in the Chinese market. Although this market share is still too small to offset European weakness, investors are looking to China to help boost strong North American results driving into 2013. Other News About GM U.S. Sells More Of GM - What Happens Next?
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Published on Mar 14, 2013
By Leo Sun