The Canadian and Ontario governments have divested 30 million shares in General Motors (GM) worth approximately $1.1 billion. This stake divested consisted of the equity the government obtain from the bailout of GM back in 2009. According the Jim Flaherty, Finance Minister, the shares were sold on the NYSE for US$37 on Tuesday. For the time being the government will still keep 119 million common shares in the automaker as well as 16.1 million series A preferred shares. During the great recession, Ottawa and Ontario provided roughly $10.6 billion in assistance to GM. The US government is also getting closer to divesting its holdings of GM and is on the road to recovering the $49.5 billion that it provided the automaker.
What did GM pay so far on such shares? Is it worth keeping those shares to receive further dividends or are there other avenues to fetch similar if not higher yields in the market is the question whihc needs answers. I couldn’t follow the Finance Minister’s clarification on this and will be grateful if someone in the group clarify this point.
Thanks
Rao Jillepalli, BE MBA CFP
The shares must trade well above where they are today for the government to recoup the bailout funds. However, since having reached lows of approximately $19 in 2012, the shares have climbed back substantially. I think the government is looking at this as an opportunity to de-risk. I wouldn’t be surprised to see a lot more selling in the short to medium term, even if at a loss.