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View Full Version : Economics U.S. Hurries to Sell GM Stock


Deberg_1990
04-19-2011, 10:58 AM
:facepalm:


Will probably take about a 12 Billion dollar loss......



http://online.wsj.com/article/SB10001424052748703916004576271382418887092.html?mod=WSJ_hp_LEFTWhatsNewsCollection#articleTabs%3Dar ticle



The U.S. government plans to sell a significant share of its remaining stake in General Motors Co. this summer despite the disappointing performance of the auto maker's stock, people familiar with the matter said.

A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.

To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering.

"Planning for the sale of our remaining GM stock is still at an early stage, and the IPO lock-up does not expire until late May," a Treasury spokesperson said. "At that point, we will consider all of our options, based on our twin goals of protecting taxpayers' interests and exiting as soon as practicable."

Shares have been hurt by rising fuel prices, industry production disruptions and management turnover. At Monday's price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.

Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year's end, avoiding a potentially controversial sale in the 2012 presidential election year.

GM also would like an early exit in large part because it faces tight restrictions on executive pay as long as the U.S. government is a part owner.

GM's successful $23.1 billion IPO in November reduced the U.S. government's stake in GM to 26.5% from 61%. As a condition of the IPO, the Treasury isn't able to sell additional holdings before May 22.

At the time of the IPO, Treasury officials and banks underwriting the deal believed the price would climb through the winter, enabling the government to sell most or all of its remaining stake within weeks of the lifting of the sales restriction at a narrower loss to taxpayers, the people familiar said.

Shares have fallen by recent events that have undermined investor confidence in GM. Those include the rise in gas prices, which hurt sales of big, highly profitable trucks. Wall Street also is fretting over recent management moves such as the unexpected departure of Chief Financial Officer Chris Liddell.

Investors also were spooked by GM's sales-incentive blitz in January and February, which could temper the auto maker's first-quarter earnings. GM is expected to report next month that it made money in the first quarter and generated cash from operations, people familiar with the matter said.

The size and form of a summer share offering is under discussion at Treasury. A final decision hasn't been made by Treasury Secretary Timothy Geithner, who would need to sign off on a big sale. If GM shares dive, Treasury could decide to hold off longer. Unlike in the IPO, when the government, banks and GM worked closely together on the deal, the government has more leeway to decide how to proceed because GM has already gone public.

GM share price could become further depressed after investors holding bonds of the now-bankrupt "old-GM" receive warrants and stock for existing GM shares. That will happen April 21.

Treasury officials haven't contacted GM about a target date for the sale, a person familiar with the matter said. A sale in May is unlikely because Treasury would need time to put together a deal once the May share sales restriction lifts. July is unlikely because investors would likely want to see results from GM's quarter ending June 30. That leaves the months of June, August and September as the prime targets for an offering.

notorious
04-19-2011, 11:46 AM
A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.




50 Billion.


They should have just let the market kill a failed company and allow another (Ford, Chrysler,etc.) to grow into it's place.


To large to fail? Bullshit.

LOCOChief
04-19-2011, 11:53 AM
GM- shitty product.

Not too big to fail. To big to be managed properly and hand strung by the uaw.

Look at any GM halfton driving down the road, they can't even get the lights to work. I'd be ashamed if I ever touched one of those POS during manufacturing.

Cave Johnson
04-19-2011, 11:55 AM
50 Billion.

They should have just let the market kill a failed company and allow another (Ford, Chrysler,etc.) to grow into it's place.

To large to fail? Bullshit.

Chrysler? I know it's not 4/20 yet, but you must be high. They are/were in way worse shape than GM. Also, allowing GM to fail would have had a huge impact on the parts manufacturers.

This is basically a political problem, choosing to sell when it's most politically convenient rather than best for the taxpayers.

talastan
04-19-2011, 12:00 PM
50 Billion.


They should have just let the market kill a failed company and allow another (Ford, Chrysler,etc.) to grow into it's place.


To large to fail? Bullshit.

US Government too big to fail!! :thumb: /sarcasm

I'm sorry but until we look at the government as a corporation we will have this crap all the time. If any other company lost its pants in a deal like this the shareholders would have the board of directors' jobs. Taking a 20%+ loss on an investment that many have already told you it won't work should earn you a one-way ticket to the unemployment line. Shareholders (US taxpayers) need to vote accordingly this next election should this happen.

Radar Chief
04-19-2011, 12:00 PM
50 Billion.


They should have just let the market kill a failed company and allow another (Ford, Chrysler,etc.) to grow into it's place.


To large to fail? Bullshit.

And take the hit in campaign contributions from the UAW? Pffft.

notorious
04-19-2011, 12:08 PM
Chrysler? I know it's not 4/20 yet, but you must be high. They are/were in way worse shape than GM. Also, allowing GM to fail would have had a huge impact on the parts manufacturers.

This is basically a political problem, choosing to sell when it's most politically convenient rather than best for the taxpayers.

I wasn't saying that Chrysler would be the one, but they would have the opportunity to take advantage.

As for the parts manufacturers: Don't put all of your eggs in one basket.



The economy thrives when money is moving, and nothing will ever change that.

Amnorix
04-19-2011, 01:50 PM
Eh. We all forget just how badly the entire economy was performing when we decided to rescue GM. Letting GM fail would have put dozens of businesses out of business, or close to insolvent, as the GM bankruptcy wound through the courts. The legal costs of such a bankruptcy would be mind-boggling.

Worse, the ripple effect it would've had on the economy would have been frightening.

I supported the GM-bailout at the time. The problem isn't the $11 billion, it's the moral hazard.

I'd like to unwind it as soon as possible. Government ownership of massive corporations should be undertaken reluctantly, and unwound as soon as possible.

Simplex3
04-19-2011, 02:11 PM
Wait, didn't someone tell me in this very forum that we're already in the black on this deal? How could we now be losing money?

Stewie
04-19-2011, 02:16 PM
Only the US gov't would tell everyone they're going to sell a boatload of stock before they do it. I'm sure shareholders are happy about that.

Otter
04-19-2011, 02:23 PM
US Government too big to fail!! :thumb: /sarcasm

I'm sorry but until we look at the government as a corporation we will have this crap all the time. If any other company lost its pants in a deal like this the shareholders would have the board of directors' jobs. Taking a 20%+ loss on an investment that many have already told you it won't work should earn you a one-way ticket to the unemployment line. Shareholders (US taxpayers) need to vote accordingly this next election should this happen.

:clap:

And that in a nutshell is why the bullshit never ceases, there's no accountability for screwing up like there is in the real world.

Amnorix
04-19-2011, 02:25 PM
Wait, didn't someone tell me in this very forum that we're already in the black on this deal? How could we now be losing money?

I think that was TARP, or a portion of TARP (the loans to the banks).

Amnorix
04-19-2011, 02:37 PM
Yeah found it. $20B profit.

http://www.thestreet.com/story/11049777/1/tarp-yields-20-billion-profit-treasury-says.html

Simplex3
04-19-2011, 02:39 PM
So we've gotten most of a fraction of the money spent back, and they're sure they'll get enough more to make that fraction pay off.

Forgive me if I'm not jumping with joy. But thanks for hunting down the info.

Cave Johnson
04-19-2011, 02:58 PM
Only the US gov't would tell everyone they're going to sell a boatload of stock before they do it. I'm sure shareholders are happy about that.

If only the shareholders had know that the gov't was going to sell at some point.....

Stewie
04-19-2011, 03:12 PM
If only the shareholders had know that the gov't was going to sell at some point.....

Discretion. This dumbassery is beyond belief. Mutual funds and hedge funds sell huge positions all the time. They do it quietly and over time to maximize their position.

notorious
04-19-2011, 03:21 PM
Eh. We all forget just how badly the entire economy was performing when we decided to rescue GM. Letting GM fail would have put dozens of businesses out of business, or close to insolvent, as the GM bankruptcy wound through the courts. The legal costs of such a bankruptcy would be mind-boggling.

Worse, the ripple effect it would've had on the economy would have been frightening.

I supported the GM-bailout at the time. The problem isn't the $11 billion, it's the moral hazard.

I'd like to unwind it as soon as possible. Government ownership of massive corporations should be undertaken reluctantly, and unwound as soon as possible.


So, GM is untouchable. Another car manufacturer will have no chance to be allowed to take over GM's portion of the market, even if GM is the shittiest ran company in America.

You have little faith in the free market picking up that portion of the market GM would have vacated. Other businesses would have hired the employees that are worth hiring, and sales would improve due to growth in the surviving manufacturers.

Cave Johnson
04-19-2011, 03:24 PM
Discretion. This dumbassery is beyond belief. Mutual funds and hedge funds sell huge positions all the time. They do it quietly and over time to maximize their position.

Sure, but maximizing profits isn't the only governmental interest/motivator, and shareholders knew that going in. If you don't like it, don't buy GM stock.

Stewie
04-19-2011, 03:31 PM
Sure, but maximizing profits isn't the only governmental interest/motivator, and shareholders knew that going in. If you don't like it, don't buy GM stock.

Maximizing what profits? GM's profits? It was nothing but a Ponzi scheme dreamed up by the gov't to dupe the uniformed.

Cave Johnson
04-19-2011, 03:34 PM
Maximizing what profits? GM's profits?

Maximizing TARP's profits, specifically.

It was nothing but a Ponzi scheme dreamed up by the gov't to dupe the uniformed.

You're thinking of Social Security. ;)

chiefsnorth
04-19-2011, 03:36 PM
Chrysler? I know it's not 4/20 yet, but you must be high. They are/were in way worse shape than GM. Also, allowing GM to fail would have had a huge impact on the parts manufacturers.

This is basically a political problem, choosing to sell when it's most politically convenient rather than best for the taxpayers.

seeing Clay Davis argue for GM seems about right. They're rainmaking us ;)

Stewie
04-19-2011, 03:39 PM
Maximizing TARP's profits, specifically.



You're thinking of Social Security. ;)

TARP profits are a complete joke and everyone knows it. TARP is the KING of mark-to-model. "We'll be back to profitability in 2025, just you watch!"

Heh! Yep on SS! Small time Ponzi schemers get years in prison. In the Federal Government it's everyday business.

BucEyedPea
04-19-2011, 03:48 PM
Eh. We all forget just how badly the entire economy was performing when we decided to rescue GM. Letting GM fail would have put dozens of businesses out of business, or close to insolvent, as the GM bankruptcy wound through the courts. The legal costs of such a bankruptcy would be mind-boggling.

Worse, the ripple effect it would've had on the economy would have been frightening.

I supported the GM-bailout at the time. The problem isn't the $11 billion, it's the moral hazard.

I'd like to unwind it as soon as possible. Government ownership of massive corporations should be undertaken reluctantly, and unwound as soon as possible.

Seriously? Bankruptcy would have been a good thing. Failure can pave the way for renewal. GMs resources would have been freed up for entrepreneurs to use in other productive ventures. Going the bail-out route just means more wealth gets destroyed by the same black hole. Something socialists are fond of doing since govt is better than a creative free-market which statists have no faith in.

ChiefsCountry
04-19-2011, 04:19 PM
If the fucking autoworkers piece of shit union didn't own stock in the company it would be better.

notorious
04-19-2011, 04:38 PM
Seriously? Bankruptcy would have been a good thing. Failure can pave the way for renewal. GMs resources would have been freed up for entrepreneurs to use in other productive ventures. Going the bail-out route just means more wealth gets destroyed by the same black hole. Something socialists are fond of doing since govt is better than a creative free-market which statists have no faith in.

Exactly.


A smaller manufacturer takes advantage and grows with proper management.


Basic Economics.

mlyonsd
04-19-2011, 04:45 PM
I must admit we're losing less money than I thought we would. Of course that implies GM stays solvent.

Simplex3
04-19-2011, 05:22 PM
I must admit we're losing less money than I thought we would. Of course that implies GM stays solvent.

Maybe the government knows something about GM and understands that it's going to tank again so they're trying to divest.

donkhater
04-19-2011, 06:12 PM
Eh. We all forget just how badly the entire economy was performing when we decided to rescue GM. Letting GM fail would have put dozens of businesses out of business, or close to insolvent, as the GM bankruptcy wound through the courts. The legal costs of such a bankruptcy would be mind-boggling.

Worse, the ripple effect it would've had on the economy would have been frightening.

I supported the GM-bailout at the time. The problem isn't the $11 billion, it's the moral hazard.

I'd like to unwind it as soon as possible. Government ownership of massive corporations should be undertaken reluctantly, and unwound as soon as possible.

So what you are saying is that if the business failed it would have had a trickle down effect to other aspects of the economy?

mlyonsd
04-19-2011, 08:01 PM
Maybe the government knows something about GM and understands that it's going to tank again so they're trying to divest.Maybe they figured out the Volt is going to be the same failure as Obama's energy plan.

Saul Good
04-19-2011, 08:10 PM
Sure, but maximizing profits isn't the only governmental interest/motivator, and shareholders knew that going in. If you don't like it, don't buy GM stock.

Is there anything you won't say to defend this administration? You are literally making the assertion that the government shouldn't try to be good stewards of our money. They don't have to try to maximize profits, but they should refrain from running the stock price into the ground right before they plan to sell billions worth.

Silock
04-19-2011, 11:02 PM
Remember when we used to think that we had to put out forest fires, but no matter how many we put out, we just kept seeing MORE forest fires? And then we realized that if we just let the forests burn like they're supposed to, devastating fires were not only less frequent, but plants that were designed to thrive after a forest fire and restore balance to the ecosystem could flourish?

This is kinda like that, except we haven't learned to let the motherfuckers burn yet.

Garcia Bronco
04-20-2011, 05:34 AM
Is there anything you won't say to defend this administration? You are literally making the assertion that the government shouldn't try to be good stewards of our money. They don't have to try to maximize profits, but they should refrain from running the stock price into the ground right before they plan to sell billions worth.

I agree with you that dude will say anything to defned the administration, but TARP was all about bailing us out. Just like they bailed out my money in the market; this bailed out all the businesses doing business woth GM. Hopefully they've made the moves to seperate themselves from GM.

chiefsnorth
04-20-2011, 06:11 AM
I must admit we're losing less money than I thought we would. Of course that implies GM stays solvent.

If they don't we'll just bail them out again.