General Motors Company (NYSE:GM) Headquarters in Detroit. Photo Credit: General Motors Company.
It’s been an excellent year for General Motors Company (NYSE:GM) and cross-town rival Ford Motor Company (NYSE:F). Both are reaping profits not seen in a decade, and sales continue to increase as the U.S. automotive market rebounds — recently topping a Seasonally Adjusted Annual Rate of 16.1 million for the first time since 2007. Today, General Motors Company (NYSE:GM) is trading 2% lower on news that Canadian and Ontario governments will be unloading 30-million General Motors Company (NYSE:GM) common shares. Is this a bad sign, or a better entry point?
Today, the Canadian and Ontario governments, which acquired shares in General Motors Company (NYSE:GM) during its 2009 bailout, unloaded roughly 25% of their common shares. Unloading the 30 million at the $37 price mark puts the value at about $1.11 billion. When the deal closes on Sept 16, it will leave the governments holding a little over 110-million General Motors Company (NYSE:GM) common shares, and 16.1-million preferred shares.
Finance Minister Jim Flaherty said in a statement, according to Reuters:
As we said from the start, our investment in GM was always meant to be temporary as we worked to maximize the return to Canadian taxpayers. The Government of Canada is committed to exiting from ownership of GM as quickly as feasible, while maximizing the return for Canadian taxpayers, as we demonstrated today.
Back in the homeland, in December, the U.S. Treasury said it would sell its entire stake in General Motors Company (NYSE:GM) over the next 15 months. Just recently, it sold an additional $811 million worth of GM common stock in July — leaving roughly 186-million shares left. With both governments having hundreds of millions of shares left to sell off, it could provide some downward pressure on the stock price; but that isn’t necessarily a bad thing.
Time to get in?
This could actually provide a nice entry point for investors trying to play GM’s rebound. Consider that GM already trades at a cheaper forward price-to-earnings ratio of 6.5, compared to Ford Motor Company (NYSE:F) at 9.2, and Toyota Motor Corporation (ADR) (NYSE:TM) at 13.1.
There are quite a few positive catalysts going forward for GM and its investors. First consider that its most profitable models, the Silverado and Sierra, are up 25% and 24%, respectively, in sales this year. As construction improves, and more people begin to replace vehicles, GM will continue to pull in big profits from the full-size pickup segment.