Washington — The U.S. Treasury said Wednesday it plans to sell 30 million additional shares of General Motors stock in a new public offering in conjunction with GM’s return to the S&P 500 index on Thursday.
The United Auto Workers Retiree Medical Benefits Trust — which holds about 14 percent of GM — will also participate by selling 20 million shares, making the total offering size 50 million shares. It represents about 12 percent of Treasury’s outstanding GM stock.
The move may mean that Treasury completely exits in 2013, rather than by the end of March 2014. The return to the S&P will prompt significant demand for GM shares and the stock has recently traded near its highest level since February 2011. GM is filing a new prospectus ahead of the sale.
The Treasury sold nearly 20 percent of its remaining shares in General Motors Co. in the first three months of the year, the Detroit automaker disclosed Thursday.
The Treasury, which initially held 60.8 percent of GM as part of the U.S. $49.5 billion bailout, now owns just 16.4 percent, or 241.7 million shares. In December, the Treasury sold GM 200 million shares of its stake for $5.5 billion to reduce its stake to 300 million shares.
In total, Treasury has recouped $30.6 billion. At current trading prices, Treasury would lose around $10 billion on its GM bailout.
GM’s return will mark the purchase of GM shares by many stock index funds. GM said it was happy to assist.
“We appreciate the opportunity to assist in this offering made possible by our rejoining the S&P 500,” said Dan Ammann, GM senior vice president and chief financial officer. “Our focus remains on continuing the progress we are making in the marketplace with world-class cars, trucks and crossovers.”
RBC Capital analyst Joseph Spak said the move means that the UAW trust will hold about 140 million shares after the sale, or a 9 percent stake, about the same size as the Canadian government’s 140 million shares it still holds as part the Ontario and Canadian federal government’s $10 billion GM bailout in 2008 and 2009.
He said it means Treasury could exit ahead of schedule — by the end of the year.
“The sale is opportunistic given the recent S&P500 inclusion announcement, which we estimate requires a 85.4mm share buy. The accelerated sell-down by the government should be viewed positively,” he said. “We believe (the Treasury exit) could be quicker — perhaps by the end of the year. This could open the door for additional capital actions including a potential dividend.:”
Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the managers of the Treasury, UAW sale.
Shares of GM stock rose briefly at the open of trading on the news, but were recently down $0.18, or 0.5 percent, to $34.78.