Friday, November 19, 2010

Money Gone: Taxpayers Lost $9Bn on GM Offering

Oh, well.

The U.S. government is satisfied with pricing and the investor lineup in the General Motors Co [GM.UL] (GM.N) public offering, a senior Obama administration official said.

Ron Bloom, the administration's point man on auto restructuring, told Reuters Insider ahead of GM trading on Thursday that the government wants a fair return for taxpayers on its $50 billion investment, but also wants to "get out of this thing as soon as we can." ....Bloom said GM has done the right thing and pricing of $33 per share is a "fair deal" even though the partial sale represents a loss of roughly $9 billion on taxpayers' original investment.

As to the remaining GM stock in the Gummint's portfolio? Don't hold your breath on a massive capgain:

...even with that stock sale and other money returned to the government by GM, about $27 billion will remain unpaid. Whether taxpayers get that back will depend upon the price the government gets for its remaining 33% stake in the company when it sells shares in the future. The share price will have to rise about 65% in order for taxpayers to break even...

ObamaNomics in action.

HT: LegalInsurrection


jimspice said...

I read that the remaining stock would have to be sold at an average of $53 to break even, with a preference to have it all sold in the next two years. Admittedly, that adds a unique spin to the market, and might produce some strategic trading strategies not normally seen. My guess is that taxpayers will end up losing a few billion $$, but the long term up of it, that is, avoiding losing 1M jobs, is worth it.

Dad29 said...

Ritholtz agrees with you that keeping the jobs was a good thing--but I don't know what he thinks about the tank-bath on the stock.

Others (I'm included) are not so sure that 1 million jobs would have disappeared with Chapter 7. Who would NOT grab the Chevrolet franchise?

Anonymous said...

Had GM gone into bankruptcy it would have had the ability to push existing pension guarantees to the trust and all contract would have been open for restated base rates and benefits.

GM would have come out financially stronger for the long run and it would not have lost it's loyal southern base of truck buyers. Ford and Nissan now dominates the non-commercial truck sales from Tennessee south to central Florida.


neomom said...

That is the great straw man - that by allowing GM and Chrysler to go into bankruptcy, they both would have disappeared. They wouldn't have.

Just like United, Delta and American airlines didn't....

This was a big expensive band-aid on a wound that needed surgery. And didn't fix anything.