The U.S. Treasury Department will only decide if it will sell more of its investment in General Motors Co. after it has examined the carmaker’s earnings in the first quarter, according to an insider. Beginning May 22, the Treasury could sell a portion of its remaining 500 million GM shares, which are equivalent to a 33% ownership.
The source said that officials are waiting to receive first-quarter results and to monitor the stock when the bondholders in GM’s bankrupt predecessor company are given shares to partially compensate them. This year in New York trading, GM has dropped 19%. It also dropped 9.3% from its IPO price.
The source divulged that the Treasury is willing to lose on the shares, which closed last Monday at $29.97. On the other hand, the Obama administration is aiming to get a price that is in the range of the $33 IPO price at least.
Just to break even on its investment, the U.S. government will have to sell shares at about $53 each. As the lockup period is set to expire on May 22, the Treasury may file to sell shares with a traditional S-1 filing.
The actual sale may be put off until June as the Securities and Exchange Commission would then have to review the offering like an IPO. If the Treasury Department chooses to wait until July 1, the U.S. government could sell shares without having to go through a comprehensive review.
As a result, the offering would get started earlier. The source added that if this is the case, it’s likely that the Treasury will wait until GM posts earnings in the second quarter before selling more stock, meaning that the sale will be delayed until August.