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Gov't. Sells $1.2B More GM Stock

Wed, 11/13/2013 - 2:06pm
Tom Krisher, AP Auto Writer

DETROIT (AP) -- General Motors may be free of government ownership by the end of the year — news that sent the company's stock higher on Wednesday.

The Treasury Department, in a monthly report to Congress, said Tuesday that it sold $1.2 billion worth of GM stock in October. The report didn't say how many shares were sold, but it's likely that the government's stake in of the company is now less than 4 percent.

"We believe the exit will be complete by year-end, which, in our view, is a positive catalyst for the stock," Sterne Agee analyst Michael Ward wrote in a note to investors Wednesday morning.

That could clear a path for GM to start paying dividends or buy back more of its stock, Buckingham Research analyst Joseph Amaturo wrote to clients.

Both Amaturo and Ward have $50 price targets and "Buy" ratings on GM stock. The targets are 32 percent higher than the Wednesday trading price. The stock has risen more than 60 percent in the past year on strong earnings, new product introductions and the prospect of the government's exit from the business.

Shares gained $1.24, or 3.4 percent, to $37.90 in midday trading.

Amaturo wrote that GM has the balance sheet to buy back the remaining government shares to end government-imposed limits on executive pay. He also said that in early 2014, GM could start paying a dividend of 80 cents per year, about a 2.2 percent annual yield at the current stock price.

The government got 912 million shares, or a 61 percent stake in GM, in exchange for a $49.5 billion bailout that saved the company from financial ruin during the financial crisis in 2008 and 2009. Treasury gradually has sold off its stake, and a watchdog says the government expects to lose at least $9.7 billion on the bailout.

The Treasury report said the government has recovered roughly $37.2 billion of the $49.5 billion it spent to save GM five years ago. That means taxpayers are still $12.3 billion in the hole.

The report didn't say how many shares were sold in October or how much stock the government still owns. As of Sept. 26, it owned 101 million shares or about 7 percent of the company.

GM stock traded from $33.92 to $37.99 in October. At the midpoint of that range, the government would have sold about 33.4 million shares for $35.96 each to net $1.2 billion.

That would leave the government with roughly 70 million shares, or about 4 percent of GM. Those shares would have to sell for more than $175 each for the government to break even.

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