The U.S. Treasury on Wednesday announced plans to liquidate its holdings in General Motors over the next 15 months, starting with the sale of about 40 percent of its shares by the end of this month.
GM will purchase 200 million of the 500 million shares held by the government at $27.50 a share, almost 8 percent above Tuesday's closing price but still barely more than half the price at which the government needs to sell if it is to break even.
The Treasury Department said it intends to sell the remaining 300 million shares "through various means in an orderly fashion within the next 12-15 months, subject to market conditions." Some of the sales could start as early as next month.
"The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time," said Timothy G. Massad, the department's assistant secretary for financial stability.
The government became GM's single largest shareholder following a $49.5 billion bailout of the automaker in 2008 and 2009. So far, the Treasury Department has recovered almost $29 billion, including the expected $5.5 billion from the GM buyback planned this month.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the
After the repurchase, taxpayers will still own about 19 percent of GM's stock on a fully diluted basis.
"A U.S. Treasury selldown was increasingly anticipated, although the actions were earlier than we expected and at a lower price," said Peter Nesvold, an analyst with Jefferies & Co.
Nesvold said he expected a price of about $30 a share, given the potential value of GM.
The deal will not affect the automaker's credit positions as it has more than enough cash to handle the transaction, said Robert Schulz, an analyst with Standard & Poor's Ratings Services.
Since the government bailout, GM has announced investments of more than $7.3 billion in the U.S., is expanding its product line and adding jobs. It remains the largest seller of autos in the U.S., although it will lose the top ranking globally to Toyota Motor this year.