American taxpayers stand to take a big hit on the $50 billion “investment” made for them by the federal government, as it plans to sell a large chunk of its remaining shares of General Motors stock this summer. If a buyer is found in the next few months, the underwhelming performance of GM stock will mean that upwards of $11 billion in taxpayer money will disappear down the rat hole:
To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering.
Shares have been hurt by rising fuel prices, industry production disruptions and management turnover. At Monday’s price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.
Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year’s end, avoiding a potentially controversial sale in the 2012 presidential election year.
GM also would like an early exit in large part because it faces tight restrictions on executive pay as long as the U.S. government is a part owner.
At the time of the “Government Motors” bailout, the Obama Administration insisted that the taxpayers would recover all of the $60 billion spent on the rescue, and as recently as last November, Obama boasted that “American taxpayers are now positioned to recover more than my administration invested” in the automaker. That was in the heady days of GM’s successful $23.1 billion IPO which reduced the U.S. government stake in GM to 26.5% from 61%.
Treasury officials and banks underwriting the deal at the time argued that GM’s stock price would climb through the winter, enabling the government to sell most or all of its remaining stake in the spring. But recent events that have undermined investor confidence in GM have caused shares to fall, as “The Administration That Can’t Talk Straight” took a big gamble with the taxpayers’ hard-earned money, and that roll of the dice came up snake eyes. The woeful inadequacy of Barack Obama and his White House full of incompetents is nothing less than an Epic Fail. Meanwhile, GM executives are laughing all the way to the bank.