Will GM (GM) Shares See Another 'Treasury Pop' in FY13?
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Earlier on the session, the biggest news hitting the auto industry was General Motors (NYSE: GM) offering to repurchase 200 million shares from the U.S. Treasury for $27.50 per share, a 7.9 percent premium over Tuesday's close.
However, the Treasury still holds 300.1 million shares of GM...which is a lot of stock by any account. The Treasury noted that it got back $28.7 billion of the $49.5 billion it lent to GM back in 2008 and 2009, but the Obama administration said at the time that GM didn't have to pay back all of the money.
Given that there is still a net outlay of about $20.8 billion, the U.S. Treasury would need GM shares to trade near $70 apiece over the next 12 to 15 months to come out even flat on the deal. Given the history of GM, that's not likely to happen even in the best of circumstances.
But, that doesn't mean investors can't profit. Should GM stock fall 7 percent to 10 percent, it might be a nice speculative short-term play for some who expect a similar pop sometime in 2013. The Treasury doesn't need to make all of its money back, but it's unlikely that it will accept a price much lower than what was announced today.
GM shares are up over 8 percent Wednesday afternoon.
However, the Treasury still holds 300.1 million shares of GM...which is a lot of stock by any account. The Treasury noted that it got back $28.7 billion of the $49.5 billion it lent to GM back in 2008 and 2009, but the Obama administration said at the time that GM didn't have to pay back all of the money.
Given that there is still a net outlay of about $20.8 billion, the U.S. Treasury would need GM shares to trade near $70 apiece over the next 12 to 15 months to come out even flat on the deal. Given the history of GM, that's not likely to happen even in the best of circumstances.
But, that doesn't mean investors can't profit. Should GM stock fall 7 percent to 10 percent, it might be a nice speculative short-term play for some who expect a similar pop sometime in 2013. The Treasury doesn't need to make all of its money back, but it's unlikely that it will accept a price much lower than what was announced today.
GM shares are up over 8 percent Wednesday afternoon.
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