Earlier this week, the U.S. Treasury Department disclosed that it had raised $489.9 million from the sale of General Motors Company (NYSE:GM) shares in February.
The Feds didn’t disclose exactly how many shares they had sold, but given General Motors Company (NYSE:GM)’s share prices in February, it’s a considerable number – at least 17 million shares, possibly 18 million or a bit more.
Clearly, the government is serious about its plan to exit GM, announced last December. And while that seems like good news for the General, it could create some interesting complications.
Will the Feds ever recoup their “investment” in GM?
Back in December, Treasury agreed to a deal in which it would sell 200 million of its remaining 500 million shares of General Motors Company (NYSE:GM) directly to GM, in exchange for $5.5 billion – and would sell its remaining shares gradually, on the open market, over the following 15 months or so.
That deal left the Feds with 300 million shares. Those shares are the last major legacy of General Motors Company (NYSE:GM)’s controversial 2009 “bailout”, in which the government took a stake in GM in exchange for financing the battered auto giant’s high-speed restructuring via bankruptcy.
The financing provided by the Treasury for GM’s restructuring – its “investment” in GM, as it has been termed on occasion – totaled some $49.5 billion. Of that, GM has now “repaid” – directly or indirectly – a bit less than $30 billion:
$6.7 billion in cash, the last of which was paid in April of 2010 (when then-CEO Ed Whitacre declared that GM’s debt had been “paid in full”)
$13 billion via GM’s IPO, when the government sold about 45% of its stock holdings
$2.1 billion when General Motors Company (NYSE:GM) bought back some preferred stock from the Treasury in late 2010
$5.5 billion when GM bought back those 200 million shares from the Treasury in December of 2012
$646.3 million in sales of GM stock by the Treasury in January and February of 2013
The remainder in interest and dividends on loans and preferred stock.
That leaves the Treasury short about $20 billion – and with something like 277 million shares left to sell. The math on that doesn’t work out well for taxpayers: The Feds need to get something like $72 a share in order to break even on their “investment”.
GM is trading at a bit over $28 as I write this on Thursday. Clearly, the Feds aren’t likely to recoup their money any time soon – at least, not by selling their remaining GM stock.
How is that going to work out for GM?