Shares of General Motors (NYSE:GM) soared more than 8% in Wednesday morning trading after the company announced plans to buyback 200 million shares still held by the U.S Treasury.
The auto giant said it would pay $27.50 a share for the government-owned shares for a total of about $5.5 billion. After the share repurchase, the government will still own 300 million GM shares, but indicated that it would its remaining stake within 15 months, ultimately ending its involvement in GM, the Associated Press noted.
Despite the share repurchase, the U.S. government will need to get $21 billion from selling its shares in order to recoup the funds spent on its 2009 bailout of the company.
Shares of GM closed above $25 a share on Tuesday, but rose to over $27 in early trading on Wednesday. The government would have to sell its stock at $70 a share just to recover the price of the bailout.
GM received a $49.5 billion infusion from the federal government during its Chapter 11 bankruptcy. The bailout left U.S. government owning more than a quarter of the company’s shares. U.S. rival Chrysler also almost collapsed during the financial crisis, but was ultimately sold to Italy’s Fiat (PINK:FIATY), while Ford (NYSE:F) did not receive a government bailout.
Earlier this month, GM raised its year-end incentives on full-sized trucks in order to reduce an oversupply that its swelling vehicle inventories, caused by falling sales of its Silverado and Sierra trucks.