Stock Market Reports: U.S. Treasury Sells GM Shares At A Loss

U.S. taxpayers are taking it on the chin for about $10 billion as the Treasury Department sells off part of its share of General Motors (GM.UL). Whether the rest of the investment can be recovered depends on how GM’s stocks perform in the coming years
Common Shares Being Sold
The Treasury Department is selling 358.5 million shares at the IPO price of $33. That comes out to $11.8 billion of taxpayer money being recovered. The Treasury valued its entire stake in GM at about $30 billion, including the sold shares. 912 million shares were originally purchased at a cost of $40 billion. To recover all the investment, the stock price would have to have been $43.85. After the sale, the government will still have 554 million shares of GM stock.

Full Restitution Will Take Time
The government retains a 37% stake in GM, and the Treasury will not be able to sell more shares for another six months as stipulated in the terms of the IPO. U.S. taxpayers funded the original GM stock purchase of $49.5 billion last year. To recoup the remaining investment by taxpayers, the share price will have to rise to nearly $51 per share.

The Obama administration defended the sell-off, which they say reflected and urgency to get out of the auto business. The investment has been politically damaging for Obama, and even GM has complained that sales have suffered as a result of being a “government run” company.

IPO Biggest In U.S. History
In the meantime, GM is enjoying a massive infusion of capital as a result of the IPO. The sale of 478 million common shares raised $15.77 billion, and preferred stock fetched another $4.35 billion. An option that would allow underwriters to sell more shares may raise $23.1 billion, the biggest IPO ever.