Thursday, June 6, 2013

Treasury, UAW health care trust to sell 50M shares of GM stock

The U.S. Treasury and United Auto Workers union, capitalizing on the automaker’s rising stock price, will sell a combined 50 million shares of General Motors stock today.
The scheduled stock sale coincides with GM’s return to the S&P 500 index, and with today’s annual shareholders meeting at the Renaissance Center in Detroit.
Stock analysts say the return to the S&P will prompt significant demand for GM shares. The stock has recently traded near its highest level since February 2011. The Detroit-based automaker will replace H. J. Heinz Co. in the S&P 100 and 500 indices.
GM stock, set at $33 a share when the post-bankrupty company began public trading in 2010, lost 94 cents Wednesday in an overall down market, closing at $34.02. Shares are up about 19 percent since the beginning of the year.
The UAW’s Workers Retiree Medical Benefits Trust, which holds about 14 percent of GM, will sell 20 million shares, and the U.S. Treasury will sell 30 million of its 241.7 million shares.
The Treasury initially held 60.8 percent of GM as part of the U.S. $49.5 billion bailout.
The sale will bring the UAW’s remaining stake in GM to 9 percent of the company, and taxpayers’ share about 13 percent, compared with the 16.4 percent it owned as of April 30.
The move may mean the Treasury will sell off all its GM stock yet this year, rather than by the end of March 2014, which had been its earlier goal.
The Treasury sold nearly 20 percent of its remaining shares in General Motors Co. in the first three months of the year, the Detroit automaker disclosed Thursday, as well as 200 million shares sold to GM for $5.5 billion in December.
In total, Treasury has recouped $30.6 billion. At current trading prices, Treasury would lose around $10 billion on its GM bailout.
GM’s return to the S&P 500 will mark the purchase of GM shares by many stock index funds.
“We appreciate the opportunity to assist in this offering made possible by our rejoining the S&P 500,” said Dan Ammann, GM senior vice president and chief financial officer. “Our focus remains on continuing the progress we are making in the marketplace with world-class cars, trucks and crossovers.”
RBC Capital analyst Joseph Spak said the move means that the UAW trust will hold about 140 million shares after the sale, about the same size as the Canadian government's 140 million shares it still holds as part the Ontario and Canadian federal government's $10 billion GM bailout in 2008 and 2009.
"The accelerated sell-down by the government should be viewed positively," he said. "We believe (the Treasury exit) could be quicker — perhaps by the end of the year. This could open the door for additional capital actions including a potential dividend."

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