The U.S. Department of the Treasury is continuing its sales of GM common stock starting today by launching a third “pre-defined written trading plan.” Terms were not disclosed. At the conclusion of the second trading plan, taxpayers held 101.3 million shares of GM stock, or about 7%, which together with the sales from the first plan means that the U.S. government has now sold about 200 million shares of GM common.
Treasury did not specify how many of the remaining shares would be sold, but if market demand is large enough, the slur “Government Motors” may fade into the pages of the history of the failed Bush Administration.
The move appears coordinated with GM’s announcement earlier this week that it is issuing $3.2 billion in debt to repurchase 120 million shares of Series A Preferred Stock from the UAW VEBA. GM also plans to issue $1.2 billion of new debt to prepay in full its 7% notes held by the Canadian Auto Workers’ Union Health Care Trust, which are due in periodic installments through 2018. (GM Prices $4.5 Billion of Bonds to Buy Back VEBA Stock and GM to Buy Back UAW Held Stock. Dividends to Follow?)
GM said it would take a charge of $800 million in Q3 as a special item because of the new debt. However, because of getting out from the interest rate payments, these transactions will increase GM 2014 earnings by about $152 million or $0.11 per share. GM will announce its Q3 2013 financial results on Wednesday 30 October, and they are expected to be strong. (See GM Earns $1.2 Billion in Q2 or 75 Cents a Share)
The VEBA currently holds 260 million shares of Preferred Stock, and Canada GEN Investment Corporation holds another 16 million shares. Until the ownership of these shares transfer back to GM or other independent buyers, the slur “Government Motors” still applies since these shares were part of a controversial – but effective, in that 1 million jobs were saved – bankruptcy reorganization that Canadian and U.S. taxpayers subsidized in 2009 after the Obama Administration inherited the TARP program from President Bush.
“The third trading plan will allow us to continue exiting the investment in accordance with our previously announced timetable while maximizing the taxpayer’s return,” claimed Tim Massad, Treasury Assistant Secretary for Financial Stability.
At current stock market prices, U.S. taxpayers will likely lose ~$10 billion on the GM bailout. In December 2012, GM repurchased 200 million shares of GM common stock from Treasury. At that time, Treasury said that it would sell its remaining 300 million shares into the market in an “orderly fashion” and fully exit its GM investment within the next 12-15 months. Treasury appears to be well ahead of that schedule.
To date, Treasury claims it has recovered more than 96% or $404.9 billion of the funds disbursed through TARP, which totaled $420.92 billion. Today, all TARP collections, together with Treasury’s additional income from AIG shares, total $422.5 billion, exceeding disbursements of $420.92 billion.