General Motors Co. reached its highest share price in 10 months after saying it will purchase $5.5 billion of its stock from the U.S. Treasury, moving the government a step closer to ending the controversial bailout of the auto industry.
GM rose 6.6 percent to $27.18 in New York, the highest closing price since Feb. 17. The company will buy 200 million shares for $27.50 each, a 7.9 percent premium over Tuesday’s $25.49 close, GM said Wednesday. Treasury will still hold about 300 million shares, or 19 percent on a fully diluted basis, after the transaction and plans to sell its entire holding within 15 months, the automaker said.
The deal for 13 percent of the automaker’s stock helps the Obama administration recoup part of the $49.5 billion invested in GM, the biggest piece of an industry bailout that became a centerpiece of President Barack Obama’s first term in office and that drew criticism from Republican opponents. Cutting the stake could be good for GM’s image and its stock.
“It’s going to materially lift an overhang that’s been over the stock,” Peter Nesvold, a Jefferies & Co. analyst in New York, said in a phone interview. “There’s been this nagging fear anytime the stock gets closer to $27 or $28 where the chatter about the government sell-down picks up again.”
The shares have gained 34 percent this year and are 18 percent lower than the company’s initial public offering price of $33 each. The U.S. needed to sell its shares for more than $50 each to break even on the GM bailout.
$5.5 billion
How much General Motors will pay the U.S. Treasury to repurchase its stock
$27.50
Price per share
200 million
How many shares GM will buy
19%
How much of GM the U.S. Treasury will still own
