When should one sell their stocks? Well, that’s a question faced by each and every stock holder around the globe. The U.S. Department of the Treasury, which after the 2009 bailout, owns 32 percent of General Motor stock, has been deliberating the issue for some time and decided to take action today.
GM and the U.S. Treasury both announced on Wednesday that the former plans to buy back 200 million shares of its common stock for the price of US$27.50 per share, for a total of US$5.5 billion. The price agreed is, as GM notes, 7.9 percent above the closing price on December 18.
This marks the beginning of the government’s exit from the automaker. The Treasury plans to sell its remaining 300 million GM shares within the next 12 to 15 months, “subject to market conditions”.
“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers and it demonstrates confidence in GM’s progress and our future”, said the automaker’s CEO Dan Akerson.
GM stock price has increased by 24 percent this year and the company is on its way to post its best-ever global sales results since 2007, marking an increase in sales for the third consecutive year.
So while the agreed price is lower than the US$33 the Treasury was reported to be waiting for before start selling, this is probably a good time to offload its shares while GM stock commands a satisfying price; after all, no one can predict what the future holds…
General Motors CFO Dan Ammmann commented that, even after the end of the buy back, the company’s balance sheet “will remain very strong, with estimated liquidity of approximately US$38 billion at the end of 2012”.
By Andrew Tsaousis