The U.S. government is taking advantage of General Motors‘ return to the S&P 500 index and recent rising stock prices to sell off another 30 million shares in the nation’s No. 1 car manufacturer that it acquired in the auto bailout, the Obama administration announced Wednesday.
The Treasury Department said that it will sell the stock, plus another 20 million shares owned by a United Auto Workers’ retiree health care trust, in a public offering after the market closes Thursday, the same time that the nation’s biggest carmaker will rejoin the widely-tracked S&P index.
This is the Treasury’s first major stock sale announcement since December.
GM’s stock took the move in stride, dropping just 94 cents, or 2.69 percent, to close Wednesday at $34.02, even as the market overall suffered a sharp downturn.
GM was also restored to the S&P 500 to take the place of convenience food giant Heinz, which is going private in a buyout.
“Putting a stock in the S&P 500 generates a lot of buying,” said David Blitzer, chairmen of the S&P’s index committee. “If you happen to be somebody with a lot of stock and you’re thinking about selling it, it’s a great time to sell.”
Since the taxpayer bailout was begun under President George W. Bush and extended under President Obama, GM has been trying to shed the nickname “Government Motors” and the image that came with it of having to rely on the government.
In December, the Treasury Department sold 200 million shares back to GM. At the time, it said it would sell its remaining 300 million shares in GM within the next 12 to 15 months. That means the Treasury will have completely exited the company sometime between in December or by the end of the first quarter in 2014.
After the Treasury sells its latest 30 million shares in GM, it will leave the government with about 211 million shares, or about a 15 percent ownership stake in the company. A Treasury spokesperson said the government remains on target to sell all of its shares by early next year.
The bailout of General Motors and struggling rival Chrysler Corp. was part of the larger Troubled Asset Relief Program, or TARP, which was designed during the financial crisis to prevent industries from collapsing. Administration officials say the government has recovered more than $398 billion, or nearly 95 percent, of the nearly $420 billion bailout program.
Excluding the housing bailout, Treasury has actually recovered more than it lent out — $415 billion in share sales for $411 billion in loans.
The Treasury, however, may not recover as much money from GM. To date, the Treasury has made $31.73 billon on GM stock sales, a far cry from the nearly $50 billion it invested in the company. With only a little more than 200 million shares remaining, it is unlikely to recoup the difference.
“Our goal was never to earn a profit on GM,” a Treasury spokesman said. “The best measure of our investment in GM has always been the fact that the American auto industry is still alive and kicking and we saved over a million jobs.”
The government’s sale of additional GM shares could mean the company could soon restore its dividend, Joseph Spak, an analyst with RBC Capital Markets, wrote in a note to investors cited by Bloomberg News.
“The accelerated sell-down by the government should be viewed positively,” Mr. Spak wrote. The government could exit GM “by the end of the year. This could open the door for additional capital actions, including a potential dividend.”