General Motors Co.’s stock rose by nearly 5 percent yesterday on the news that the U.S. Treasury may complete its exit from the Detroit automaker before the end of the year.
GM shares closed at $38.44, up $1.78, setting a new 52-week-high. The stock is now is near its all-time high set in early 2011, soon after its November 2010 initial public offering.
The Treasury said it had sold $1.2 billion in GM stock in October — or approximately 33 million to 34 million shares — from the 101 million it reported owning as of Sept. 23. One Wall Street analyst said he estimates Treasury had just 63 million remaining on Oct. 31 and now has about 50 million shares remaining.
Sterne Agee auto analyst Michael Ward said in a report that “we believe the exit will be complete by year-end, which, in our view, is a positive catalyst for the stock.”
Once the government completely exits, GM will be free from government pay restrictions and will again be able to pay a dividend on its common stock.
The Treasury initially received 912 million shares as part of its $49.5 billion bailout of the Detroit automaker in 2009. It swapped about $40 billion of the bailout for the stock. The government has booked a $9.7 billion loss on the sale of about 800 million of its shares.
GM is bracing for the bad publicity it expects when the government completes its exit and announces its overall loss on the auto bailout — expected to be above $10 billion. But it argues that the cost of a GM failure in lost tax revenue, jobs, pension losses and other costs would have far exceeded the taxpayer loss on the bailout.