How General Motors Co. handles challenges in the next few months will determine if the U.S. Treasury will start to cut its stake in the company in September or later.
The factors that have pulled down GM's shares by about 10% below their initial public offering price of $33 include weak stock markets, worries about a debt crisis in Europe and the U.S., and the increasing inventory of unsold trucks. Due to these variables, it’s very difficult to estimate when the government will make its exit.
Sources say that Treasury has no intentions of selling GM shares before Labor Day this September. There’s no indication that global economic concerns will be resolved soon.
In addition, Wall Street activity in August is much lighter than at other times of year due to summer vacations so there’s no guarantee that the offering will come this September. The sources said that unless overall stock markets recovery by then, there could be a delay further into November or beyond.
It’s believed that the Treasury, which reduced its stake in GM's common shares to 32% in its November IPO, isn’t thinking about having it in October since potential investors would then prefer to wait for GM's third-quarter earnings that are not likely to be released until November.
Initially, many investors had expected the Treasury to begin disposing of its remaining GM shares after the expiration of the six-month lock-up period for selling by major shareholders in May.
The exit is expected to take place about a year or more after the IPO. An insider said that the secondary would be the “toughest offering” that Treasury will undertake. It’s even harder than the IPO since the markets aren’t doing so well and there is no catalyst.