Government Ownership Of GM Winds Down As GM Announces Buy-Back Of $5.5 Billion Of Its Shares

Thursday, December 20, 2012 08:32
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Government Ownership Of GM Winds Down As GM Announces Buy-Back Of $5.5 Billion Of Its Shares

Tags: debt | markets | stocks

GM is making more progress in its attempts to regain footing after its collapse during the 2008 crisis. It announced on Tuesday, December 18 , that it would buy back $5.5 billion worth of its stock from the government.
 
That equates to 200 million shares at $27.50 per share. The buyback will be completed by the end of 2012.

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The buyback agreement moves government ownership of GM into its final stages. The Treasury invested $49.5 billion into the company and will get back $28.6 billion.
 
This will dwindle the government’s stake in GM from 26% to 19% and will free GM from government imposed restrictions such as caps on executive compensation and use of corporate jets.
 
Corporate executives also hope the move will improve the company’s image in the marketplace. GM approached the Treasury with a buyback deal earlier in the year but had no success.
 
The government would not approve a buyback deal before the elections because GM’s stock price was off. Its breakeven point at election time would have been $52.39. Now, the breakeven price is $69.72.
 
The government has been winding down its involvement in various companies as a result of the crisis. It recently sold its stake in AIG.
 
It still holds shares in 218 banks from the TARP program, significantly less than the original 707 banks.
 
And there has yet to be a strategy announced for exiting investments in other large financial institutions like Fannie Mae and Freddie Mac.
 
GM will take a charge in the fourth quarter of about $400 million as a result of the buyback. It is expected to finish the year with about $38 billion in liquidity.

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