General Motors announced in a press release today that it plans to buy 200 million shares of its own common stock back from the US Department of the Treasury, for $27.50 per share – some $5.5 billion in total. The transaction is expected to close before the end of the year. The move by the Treasury marks a significant first step in a plan to divest itself of GM holding entirely over the course of the next 12 to 15 months, “subject to market conditions.”
After this large buyback, the Treasury will still hold some 300 million shares of the automaker’s stock – roughly equal to a 19-percent stake. Treasury officials say that sale of the rest of the shares will begin as early as next month, “through various means and in an orderly fashion.” The government plans to fully divest itself of GM shares over the next 12 to 15 months.
The $27.50 per share figure represents an eight-percent premium over the current share price, and was agreed upon after negotiations between GM and Treasury officials.
Previously, the government department had seemed reluctant to sell off its post-bailout stake in GM, as to do so at current market prices would mean a large loss of investment for the Treasury. Reports have varied, but it the “break even” point for the government has usually been pegged at roughly $50 per share.
According to the Treasury’s own press release, the government invested a total of $49.5 billion in 2008 and 2009 to help secure GM. With this latest buyback added in, the agency has “more than $28.7 billion” of its original investment.
Find press releases from both the Treasury Department and GM, below.