General Motors Company (GM) Gets A $50 PT As U.S. Govt. Cuts More Stake

Posted Nov 14, 2013

General Motors Company (NYSE:GM) shares increased to their highest level in nearly three years on Wednesday after because the company may be free from U.S. government ownership by the end of the year.  The U.S. Treasury Department announced on Tuesday that they sold $1.2 billion worth of GM stock in October.  The government did not say how many shares were sold.  It is believed that the government’s stake is now less than 4%.

It is unknown whether the Canadian government sold off any more of their shares since divesting a group of shares worth that is worth around $1.1 billion in September.

“We believe the [U.S.government] exit will be complete by year-end, which, in our view, is a positive catalyst for the stock,” stated Sterne Agee analyst Michael Ward in a note on Wednesday.  This means that GM could start paying dividends or buying back more of their stock.

GM’s stock price increased over 4% to $38.50 on Wednesday.  This is the highest level since hitting $39.48 on January 3, 2011, which was shortly after GM went public after their bankruptcy.

Buckingham Research analyst Joseph Amaturo and Sterne Agee analyst Michael Ward gave GM a $50 price target and “Buy” ratings on GM’s stock. These targets are 31% higher than the trading price on Wednesday.  GM’s stock has risen over 60% in the past year based due to strong earnings reports and new product introductions.

The U.S. government received 912 million shares (61% stake in GM) in exchange for $49.5 billion in bailout , which prevented the company from going bankrupt during the recession of 2008.  The government is believed to lose around $9.7 billion on the bailout.  The Treasury report said that the government has recovered around $37.2 billion of the $49.5 billion that they spent on GM five years ago.

It is unknown how many shares were sold in October or how much stock the government still owns.  As of September 26th, the government still owned 101 million shares (7% of the company).

After completing the sale of a number of their shares in September, Ottawa and the Ontario government said that they continued to hold over 119 million GM common shares and 16.1 million GM series A preferred stock.

[Source: Global Post]