GM Wants to Buyout Gov’t, Gov’t Says No

At its current share price the government's loss would be too high

   

The federal government has rejected a plan proposed by General Motors (NYSE:GM) that would have sold off the Treasury Department’s stake in the automaker.

Under the plan, advanced by GM earlier this year, the company would have bought back 200 million shares of stock held by the Treasury Department. The remaining 300 million shares held by the government would then have been put on the market through an initial public offering, the Wall Street Journal noted.

2013 GMC Yukon XL 2500 200x200 GM Wants to Buyout Gov't, Gov't Says No
GM to Halt Chevy Volt Production Again Next Month

However, with GM shares currently hovering around $24, the government would have taken a $15 billion loss on its stake in the company, which it bailed out in 2009 to the tune of $50 billion.

The government currently retains a 26.5% stake in the company.

In order for the government to break even on its investment in GM, the company’s shares would have double in price to $53 a share.

Treasury officials hinted that they would consider selling the stakes if the company’s shares were to reach the $30′s, even though that would still result in a loss of taxpayer dollars spent on the bailout.

Shares of General Motors fell more than 1% in Monday mid-day trading, slipping below $24 a share.


Article printed from InvestorPlace Media, http://investorplace.com/2012/09/gm-wants-to-buyout-govt-govt-says-no/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.