GM stock rises as government sells off shares

DETROIT — Shares of General Motors rose to their highest level in almost three years Wednesday after analysts applauded news that the company could be free of U.S. government ownership by the end of the year.

The Treasury Department, in a monthly report to Congress, said Tuesday that it sold $1.2 billion worth of GM stock in October. The report didn’t say how many shares were sold, but it’s likely that the government’s stake in of the company is now less than 4 percent.

“We believe the exit will be complete by year-end, which, in our view, is a positive catalyst for the stock,” Sterne Agee analyst Michael Ward wrote in a note to investors Wednesday morning.

Shares rose more than 5 percent to $38.53 late in the afternoon. That was the highest intraday price since the stock reached $39.48 on Jan. 3, 2011, shortly after GM’s post-bankruptcy return to the stock market with an initial public offering. At the close, the stock pulled back slightly to $38.44, still up 4.9 percent for the day.

Trading volume topped 43 million shares by the close, more than double the normal daily sales.

The government’s exit could clear a path for GM to start paying dividends or buy back more of its stock, Buckingham Research analyst Joseph Amaturo wrote to clients.

Both Amaturo and Ward have $50 price targets and “Buy” ratings on GM stock. The targets are 30 percent higher than the Wednesday closing price. The stock has risen more than 60 percent in the past year on strong earnings, new product introductions and the prospect of the government’s exit from the business.

Amaturo wrote that GM has the balance sheet to buy back the remaining government shares to end government-imposed limits on executive pay. He also said that in early 2014, GM could start paying a dividend of 80 cents per year, about a 2.2 percent annual yield at the current stock price.

The government got 912 million shares, or a 61 percent stake in GM, in exchange for a $49.5 billion bailout that saved the company from financial ruin during the financial crisis in 2008 and 2009. Treasury gradually has sold off its stake, and a watchdog says the government expects to lose at least $9.7 billion on the bailout.

The Treasury report said the government has recovered roughly $37.2 billion of the $49.5 billion it spent to save GM five years ago. That means taxpayers are still $12.3 billion in the hole.

The report didn’t say how many shares were sold in October or how much stock the government still owns. As of Sept. 26, it owned 101 million shares or about 7 percent of the company.

GM stock traded from $33.92 to $37.99 in October. At the midpoint of that range, the government would have sold about 33.4 million shares for $35.96 each to net $1.2 billion.

That would leave the government with roughly 70 million shares, or about 4 percent of GM. Those shares would have to sell for more than $175 each for the government to break even.

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

A decade after the recession, pain and fear linger

No matter how good things are now, it’s impossible to forget how the collapse affected people.

Panel: Motorcycle industry in deep trouble and needs help

They have failed to increase sales by making new riders out of women, minorities and millennials.

Costco rises as results display big-box retailer’s resiliency

Their model has worked in the face of heightened competition from online, brick-and-mortar peers.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Tax reform needs the public’s input on spending priorities

The GOP tax plan is a good idea, but the next step should give us a voice on how taxes are spent.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Under cloud of ethics probes, Airbus CEO Enders to step down

He leaves in 2019 after 14 years. Meanwhile, aircraft division CEO Fabrice Bregier leaves in February.

$4.99 sandwich promotion irks some Subway business owners

Management insists that “most franchisees support the promotion.”

Most Read