GM common stock is currently selling close to $39 a share as speculators are looking for either a stock buyback program or a dividend for the first time on common since the IPO.
General Motors Co. (NYSE: GM) will convert all of the outstanding shares of its 4.75% Series B preferred stock to shares of GM common on 1 December 2013 as set out under the terms of its IPO of November of 2010. On this mandatory conversion date each share of preferred will automatically change into 1.3736 shares of common stock unless previously exchanged and dividends will cease, saving GM $59 million each quarter. (GM Declares Dividend on Series B Preferred Stock) No fractional shares will be issued. Instead, GM will pay cash to keep its share count whole.
With the U.S. Treasury selling its remaining GM shares by the end of the year, the pressure is now on a profitable GM to start paying dividends on common, which it has never done, or buy back shares. On the last Q3 Earnings call with reporters, CEO Dan Akerson, a member of the GM Board where these decisions reside said, “We understand what we’re here for and wanting to return money to our shareholders and that will be a continuing thing not only this quarter but the next year and the year after.” (Chrysler Group Up, General Motors Down in Q3 Earnings
While it will take about 100 million shares of common to effect the swap, shares of Preferred were previously included as eligible dilutive securities in the Company’s calculation of share count. Upon conversion, the newly issued shares of GM Common Stock will be included in its basic share count.
