U.S. Treasury hesitates to sell its stake in GM due to low price of the shares

Article by Andrew Christian, on June 6, 2011

Saying that the price is too low, the U.S. Treasury Department is hesitating to sell a portion of its 33% stake in General Motors Co. to the carmaker, according to an insider who declined to be named as the talks are private. This source said that GM executives have talked about purchasing some of the Treasury's shares or permitting all holders of common stock to sell back shares.

The source added that the Treasury isn’t keen on selling to GM since the shares are currently trading at 13% lower than the $33 price of the initial public offering price.

The U.S. government is not interested in the idea of selling shares to GM now since it may invite criticisms that the company is getting a preferential deal. In the IPO last November, the Treasury Department sold 28% of GM at $33. Those familiar with the issue said that the government is hoping to get at least the same price in a stock sale.

As of the closing price the other day, the 500 million shares of the U.S. government in GM would have a value of about $14.3 billion. In the New York Stock Exchange composite trading, GM’s stock increased 17 cents to $28.73 at 12:25 p.m.

GM executives are studying how it will use the $30.6 billion in cash and marketable securities that it had when the first quarter ended. CEO Dan Akerson said that the carmaker is looking into the various uses for its cash such as repaying debts and supporting its pension plan

Topics: us treasury, gm

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