A story in today’s Wall Street Journal says the Treasury Department is resisting General Motors‘
push for the government to sell its remaining stake in the U.S.
automaker, even if it means a loss for U.S. taxpayers. The disagreement
over how and when the government should get out of GM is the latest
source of tension between the automaker and its benefactors in the Obama
Administration, the Journal says.
I don’t buy it. There’s no doubt that GM hates living with the stigma of being called “Government Motors” — even more so during this election year, when GM has become a political football. GM would love nothing more than to cut its ties with the government so it can restore its reputation and recruit top talent without pay restrictions.
But there is no way the Treasury is going to sell its shares in GM when the stock is trading at $24, about $10 below its initial public offering in November 2010. Treasury sold a portion of its stake back then, but still owns 500 million shares, or 26.5 percent of the company, and would need to sell at $53 a share to break even on its $49.5 billion bailout of the carmaker.
In fact, both GM and the Treasury department knocked down the Journal’s story, calling it mere speculation and saying there have been no such discussions recently.
Read more: http://www.forbes.com/sites/joannmuller/2012/09/17/gms-catch-22-has-only-one-answer/
Treasury’s biggest objection, according to the Journal, is that it would take a bath if it sells now. At Friday’s closing price, the government would lose about $15 billion on its GM stake, based on its current selling price. It’s willing to take a modest loss, according to an unnamed Journal source, but not eat the entire investment.
Read more: http://www.forbes.com/sites/michelinemaynard/2012/09/17/why-treasury-should-hang-onto-its-gm-shares/
I don’t buy it. There’s no doubt that GM hates living with the stigma of being called “Government Motors” — even more so during this election year, when GM has become a political football. GM would love nothing more than to cut its ties with the government so it can restore its reputation and recruit top talent without pay restrictions.
But there is no way the Treasury is going to sell its shares in GM when the stock is trading at $24, about $10 below its initial public offering in November 2010. Treasury sold a portion of its stake back then, but still owns 500 million shares, or 26.5 percent of the company, and would need to sell at $53 a share to break even on its $49.5 billion bailout of the carmaker.
In fact, both GM and the Treasury department knocked down the Journal’s story, calling it mere speculation and saying there have been no such discussions recently.
Read more: http://www.forbes.com/sites/joannmuller/2012/09/17/gms-catch-22-has-only-one-answer/
Why Treasury Should Hang Onto Its GM Shares
This morning’s Wall Street Journal reports that the Treasury Department is resisting efforts by General Motors to push it out of the auto company. According to the Journal, GM proposed a plan for the Treasury to repurchase 200 million of its 500 million shares, and sell the remaining shares in a public stock offering.Treasury’s biggest objection, according to the Journal, is that it would take a bath if it sells now. At Friday’s closing price, the government would lose about $15 billion on its GM stake, based on its current selling price. It’s willing to take a modest loss, according to an unnamed Journal source, but not eat the entire investment.
Read more: http://www.forbes.com/sites/michelinemaynard/2012/09/17/why-treasury-should-hang-onto-its-gm-shares/
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