GM Buying Back Stock From Government
12-19-2012, 03:29 PM
#1
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GM Buying Back Stock From Government
Interesting........received this today from GM.....
GM to Buy Back Stock from U.S. Treasury Department
December 19, 2012
General Motors today said it will purchase 200 million shares of GM common stock held by the U.S. Department of the Treasury for $5.5 billion, or $27.50 per share. The share buyback is part of the Treasury's plan, also announced today, to fully exit its entire holdings of GM stock within 12 to 15 months, subject to market conditions.
Treasury has announced its intention to sell its remaining shares of common stock into the market through various means and in an orderly fashion. Treasury intends to begin its disposition of its remaining shares as soon as January 2013, consistent with a pre-arranged written trading plan. In addition, Treasury has agreed to relinquish certain governance rights that were included in the U.S. Treasury Secured Credit Agreement with GM.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said Dan Akerson, chairman and CEO of GM.
Dan Ammann, senior vice president and CFO added, "A fortress balance sheet has been a pillar of GM's financial strategy and has enabled us to undertake today's actions. GM's balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback."
The repurchase price of $27.50 per share represents a 7.9 percent premium over the closing price on December 18, 2012. The share buyback is expected to close by the end of the year. This transaction will be accretive to earnings per share, as GM's total shares outstanding on a fully diluted basis will be reduced by approximately 11 percent. In association with this share buyback, GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.
After the repurchase, Treasury will continue to own approximately 300 million shares of GM common stock, or approximately 19 percent of the outstanding shares on a fully diluted basis. Government ownership of GM stock was the result of the auto industry rescue that began under President George W. Bush in 2008 and which was expanded by President Barack Obama in 2009.
The industry in general, and GM in particular, have rebounded sharply since the rescue. Since the rescue, GM has announced investments of more than $7.3 billion in the U.S. and created or retained more than 20,000 jobs.
"We come to work every day grateful that taxpayers from the US and Canada stepped forward to rescue our industry, and determined to show this extraordinary help was worth it," Akerson said.
GM to Buy Back Stock from U.S. Treasury DepartmentDecember 19, 2012
Treasury has announced its intention to sell its remaining shares of common stock into the market through various means and in an orderly fashion. Treasury intends to begin its disposition of its remaining shares as soon as January 2013, consistent with a pre-arranged written trading plan. In addition, Treasury has agreed to relinquish certain governance rights that were included in the U.S. Treasury Secured Credit Agreement with GM.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said Dan Akerson, chairman and CEO of GM.
Dan Ammann, senior vice president and CFO added, "A fortress balance sheet has been a pillar of GM's financial strategy and has enabled us to undertake today's actions. GM's balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback."
The repurchase price of $27.50 per share represents a 7.9 percent premium over the closing price on December 18, 2012. The share buyback is expected to close by the end of the year. This transaction will be accretive to earnings per share, as GM's total shares outstanding on a fully diluted basis will be reduced by approximately 11 percent. In association with this share buyback, GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.
After the repurchase, Treasury will continue to own approximately 300 million shares of GM common stock, or approximately 19 percent of the outstanding shares on a fully diluted basis. Government ownership of GM stock was the result of the auto industry rescue that began under President George W. Bush in 2008 and which was expanded by President Barack Obama in 2009.
The industry in general, and GM in particular, have rebounded sharply since the rescue. Since the rescue, GM has announced investments of more than $7.3 billion in the U.S. and created or retained more than 20,000 jobs.
"We come to work every day grateful that taxpayers from the US and Canada stepped forward to rescue our industry, and determined to show this extraordinary help was worth it," Akerson said.
Last edited by Snoopy; 12-19-2012 at 03:43 PM. Reason: Spelling
12-19-2012, 05:09 PM
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Disregard, I found the article.
While it probably/may not be in Canada's interest, the closure is far from, "....with no heads up to anybody". The factory and workers have a 2-4 year notice of the vehicle build move. But don't believe that plant has anything to worry about. Currently, the plant is designated as a flex plant, so other platforms will Probably be built there. Some of the production of the new Impala, for example, is configured for that plant.
12-19-2012, 05:20 PM
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Your point is well taken. BUT I don't think a POSSIBLE $5.00 difference is 50% loss.
I say possible, because nobody except a very select group know what the taxpayers paid per share. All the analysts base their opinions on opening price. A few have, who are familiar with these type of arrangements, suggested the Gov. purchased shares in a "ladder" at different prices.
But, I agree with your premise. The Fed is PROBABLY short changing us someplace along that ladder.
I say possible, because nobody except a very select group know what the taxpayers paid per share. All the analysts base their opinions on opening price. A few have, who are familiar with these type of arrangements, suggested the Gov. purchased shares in a "ladder" at different prices.
But, I agree with your premise. The Fed is PROBABLY short changing us someplace along that ladder.
12-20-2012, 05:11 AM
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Your point is well taken. BUT I don't think a POSSIBLE $5.00 difference is 50% loss.
I say possible, because nobody except a very select group know what the taxpayers paid per share. All the analysts base their opinions on opening price. A few have, who are familiar with these type of arrangements, suggested the Gov. purchased shares in a "ladder" at different prices.
But, I agree with your premise. The Fed is PROBABLY short changing us someplace along that ladder.
I say possible, because nobody except a very select group know what the taxpayers paid per share. All the analysts base their opinions on opening price. A few have, who are familiar with these type of arrangements, suggested the Gov. purchased shares in a "ladder" at different prices.
But, I agree with your premise. The Fed is PROBABLY short changing us someplace along that ladder.
GM's purchase of the 200 million shares still leaves the government about $21 billion short of breaking even on its investment. To break even, the government would have to get nearly $70 each for its shares.
Last edited by Old Lar; 12-20-2012 at 06:18 AM. Reason: more commentary
12-20-2012, 10:56 AM
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I doubt The Fed paid more than the IPO price of the New GM. That was $32-$33/share, and I do not believe the price ever exceeded, $35/share. If The Fed agreed to the $52/share price, shame on them. They are bigger jerks than what most people think they are.....and kudos to GM for getting the best deal ever.
There is also speculation that The Fed paid, in the "ladder" process, $27/share, which was the original IPO price before opening. The speculation further stated that to arrange the loan with any type of congressional support, the politicians insisted on the opening price to be higher than the pre-agreed price of $27. Thus a "built-in" profit/gain and a quick turn-around profit.
The failure to sell at the early profit, was part of the arranged deal. Based on stock market history, to sell several 100 million shares of New GM stock quickly, would drastically reflect on GM stock values for months, if not years.
I THINK, the $52/share you referred to is what is often quoted by the market analysts as what the "taxpayer" shares would need to be sold at, to break even. But again, nobody REALLY knows what the initial arranged price was.
There is also speculation that The Fed paid, in the "ladder" process, $27/share, which was the original IPO price before opening. The speculation further stated that to arrange the loan with any type of congressional support, the politicians insisted on the opening price to be higher than the pre-agreed price of $27. Thus a "built-in" profit/gain and a quick turn-around profit.
The failure to sell at the early profit, was part of the arranged deal. Based on stock market history, to sell several 100 million shares of New GM stock quickly, would drastically reflect on GM stock values for months, if not years.
I THINK, the $52/share you referred to is what is often quoted by the market analysts as what the "taxpayer" shares would need to be sold at, to break even. But again, nobody REALLY knows what the initial arranged price was.
12-20-2012, 02:32 PM
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I work for GM, and this is my opinion - not theirs.
I think this is about as positive as they could make it. Our US Treasury agreed to a huge debt-for-equity swap that is now history. GM has paid back all loans, plus about $600 million in interest. Could/should Treasury have done something differently? The arguments will go on forever, but at the time the banks were in so much trouble that they could not do BK financing in a traditional fashion. The government had to do something or there would have been a much worse recession and thousands more jobs lost. What happened with the bondholders getting the shaft and the UAW making minimal sacrifices belongs on the Obama administration. I can't defend it.
It was not necessary, not fair, and not in line with traditional bankruptcy proceedings in how various creditors are treated. There is an established hierarchy that was not followed, but that was WELL out of GM's hands.
The good part is that GM is stepping up to speed this process and buying back $5.5B of stock at a premium (Treasury could STILL have declined, transactions require 2 parties...). But I am happy to see that my employer is willing to "put up" and move this process along. I'm not proud of all the "dark years", nor the ones that led to them, but we need to move on. Simply waiting for Uncle Sam to leave would not be enough.
And, the story about the Camaro above? It surprised me, too, but is Oshawa getting the new SS? (Don't know the answer myself). Maybe it's a capacity issue, and maybe production will ultimately be split between the facilities. I don't know. I do know that the new CAFE rules are going to require that anything resembling a Camaro - in fuel consumption terms - is going to be priced like a Cadillac, out of necessity. Blame Washington.
I think this is about as positive as they could make it. Our US Treasury agreed to a huge debt-for-equity swap that is now history. GM has paid back all loans, plus about $600 million in interest. Could/should Treasury have done something differently? The arguments will go on forever, but at the time the banks were in so much trouble that they could not do BK financing in a traditional fashion. The government had to do something or there would have been a much worse recession and thousands more jobs lost. What happened with the bondholders getting the shaft and the UAW making minimal sacrifices belongs on the Obama administration. I can't defend it.
It was not necessary, not fair, and not in line with traditional bankruptcy proceedings in how various creditors are treated. There is an established hierarchy that was not followed, but that was WELL out of GM's hands.
The good part is that GM is stepping up to speed this process and buying back $5.5B of stock at a premium (Treasury could STILL have declined, transactions require 2 parties...). But I am happy to see that my employer is willing to "put up" and move this process along. I'm not proud of all the "dark years", nor the ones that led to them, but we need to move on. Simply waiting for Uncle Sam to leave would not be enough.
And, the story about the Camaro above? It surprised me, too, but is Oshawa getting the new SS? (Don't know the answer myself). Maybe it's a capacity issue, and maybe production will ultimately be split between the facilities. I don't know. I do know that the new CAFE rules are going to require that anything resembling a Camaro - in fuel consumption terms - is going to be priced like a Cadillac, out of necessity. Blame Washington.