GM stock is showing strong momentum after being in the doldrums most of 2012.
While the Treasury Department’s self-imposed deadline to dump its remaining General Motors stock is still nearly a year away, the government plans to benefit from rising prices by putting another 30 million shares on the block this month.
The announcement comes a day after word came that General Motors will rejoin the closely watched S&P 500 stock index for the first time since it filed for bankruptcy in 2009. The maker’s shares have been surging in recent weeks and are now trading above GM’s November 2010 IPO price of $33 a share.
The government isn’t alone in seizing a potential opportunity. Another 20 million GM shares will be sold by the UAW Retiree Medical Benefits Trust. Commonly known as a VEBA, it received stock in the wake of the maker’s 2009 bankruptcy.
Taxpayers initially held about 60% of General Motors in return for a nearly $50 billion bailout. The Treasury sold down its stake at the time of the IPO and then sold 200 million shares back to the maker last December. After announcing plans to cut its ties entirely by next April, it has been selling GM stock on a monthly basis and was already down to 240 million shares – a 16% stake — before the latest announcement.
(GM Set to Rejoin S&P 500 for first time since 2009. Click Here for that story.)
The good news for taxpayers is that GM has risen sharply this year and is hovering above $34 a share despite a modest dip as of midday Wednesday trading. It had hit a low point last July of just $18.72 a share.
At that point, government analysts cautioned that Treasury could lose nearly $20 billion, a figure that has steadily declined every time GM shares have gone up – though the eventual loss could still near $10 billion.
The maker’s stock has been rising for a variety of reasons, including the unexpectedly strong performance by GM in the May sales sweep. While first-quarter earnings were weak, there is a growing consensus GM is finally getting a handle on its most significant cash drain, its European subsidiary.
(How high is up for GM Stock? Click Here for that story.)
Now, it appears, the return to the S&P 500 could deliver another boost to GM shares. It is not only a matter of regaining credibility as a company but also the fact that there are specific funds that trade exclusively in stocks listed in the S&P index.
“The GM team has been working very hard to earn the business of customers around the world and to win the confidence of investors, and rejoining the S&P 500 shows we’re very much on track,” said GM CEO Dan Akerson in a statement.
Meanwhile, analyst Brian Johnson, of Barclays, advised investors the move could generate the sale of an additional 87 million shares of GM to those funds.
(Auto sales surge sharply for May. Click Here for the story.)
When GM returns to the S&P following the end of the trading day on Thursday it will regain a seat it held from 1925 through 2009, when it was tossed from the list due to its bankruptcy. The maker, long the top-ranked company in the U.S., was also number one on the S&P 500 through 1958. It will rejoin the list in the 130th spot this week.
When the dust settles I’d like the public to know how many BILLIONS that tax payers lost by providing a LOAN to GM intended to save U.S. jobs, which reportedly GM actually used some od the money to expand in China. GM has publicly stated they intend to move as many U.S. operations as possible including new vehicle design. THAT should be an eye-opener to the populace.