The U.S. government plans to sell a significant share of its remaining stake in General Motors Co. this summer despite the disappointing performance of the auto maker's stock, people familiar with the matter said.
A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.
To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering.
Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year's end, avoiding a potentially controversial sale in the 2012 presidential election year.
Tuesday, April 19, 2011
I don't get the calculation behind this. The government is planning to sell most of its remaining GM stock holdings this summer. As the stock price has declined since the IPO, and is well below the $53 level that would allow taxpayers to realize a profit, this doesn't seem to be a wise business decision. But that's the problem with a mixed economy, isn't it?
Forget the taxpayers! We must re-elect Obama! Um, I don't remember signing up for that. The only thing worse than the auto bailouts has been having to hear about how they "succeeded," but that just doesn't seem to be reflected in reality. Fact is, if you lose money on the deal, that is not success. I guess success is measured in how much power the government, especially the executive branch, was able to arrogate to itself and then disburse to its allies in the UAW.
(btw, if you are interested in a comprehensive look at all of the troubling precedents created during the bailouts, don't miss this essay by Todd Zwicki)