The U.S. Department of the Treasury today announced that it would sell another 30 million shares of General Motors Company common stock in a public offering in conjunction with GM’s return to the S&P 500 index. The S&P listing is effective at the close of trading on 6 June 2013.
S&P’s fraudulent rating of junk bonds issued in the housing market as AAA paper was directly responsible for the collapse of the financial markets in 2008, the loss of half of U.S. investor wealth, and the Great Recession whose ongoing negative effects include more than 16 million unemployed and under-employed workers. Thus far, no one at S&P or the banks paying it to rate the paper have been prosecuted for the criminal fraud that occurred under Attorney General Eric Holder, an Obama Administration appointee.
To recover the full loan Treasury would have to sell its remaining GM shares at more than $77 per share. GM is currently trading at ~$35 per share. (Treasury to Sell 242 Million Shares of General Motors Common) This means that taxpayers will ultimately take a loss on the bailout of GM but Citigroup Global Markets, J.P. Morgan Securities and Morgan Stanley & Company, all also culpable in the financial collapse will earn handsome fees from U.S. taxpayers via Treasury commissions.
The UAW Retiree Medical Benefits Trust or VEBA will also participate in the proposed offering by dumping 20 million shares, making the total offering size 50 million shares of stock that pay no dividends.
At the end of the transaction, Treasury will still own 189,194,989 or 13.8% of GM shares. The VEBA will hold 13.1% or 185,604,545 GM shares. Whether small investors will get hurt in this watering of GM stock remains to be seen. Common stock outstanding immediately after this offering will be 1,374,686,158 shares. Some argue that ultimately the government exit from GM ownership will help its stock price, a theory thus far unproven in the marketplace. [The stock to be sold was subsequently priced at $34.41 or an average high/low price of $34.035 per share.]
In December 2012, GM repurchased 200 million shares of GM common stock from Treasury. At that time, Treasury also announced that it intended to sell its remaining 300 million shares into the market in an “orderly fashion” and fully exit its GM investment within the next 12-15 months, subject to “market conditions.” Since then, Treasury has been selling GM shares through its pre-defined but secret written trading plans. GM agreed to purchase 200 million shares of GM common stock from Treasury at $27.50 per share – a transaction that closed on 21 December 2012. In January 2013, Treasury began the process of selling its shares into the market. On 11 April 2013, Treasury completed its first pre-arranged trading plan for the sale of its GM common stock. Under this plan, Treasury sold 58.4 million shares of GM common stock for total gross proceeds of approximately $1.6 billion. As of 30 April, Treasury has recovered approximately $30.7 billion of its investment in GM through repayments, sales of stock, dividends, interest, and other income. (Read AutoInformed on Treasury Now Selling More General Motors Stock at a Loss)
Treasury’s sale of its GM common stock is part of its continuing efforts to get out of the controversial Troubled Asset Relief Program (TARP). To date, Treasury claims it has recovered nearly 95% or $398.15 billion of the funds disbursed through TARP at $419.97 billion. Excluding housing programs, Treasury spent $411.72 billion for all TARP investment programs and has now recovered $415.71 billion, including the proceeds from sales of all Treasury AIG shares.