Skip to main content

Global investment group buys almost 6% of GM

General Motors announced earlier this week that one of the world’s largest investment firms, Capital Research Global Investors, has purchased a substantial amount of GM stock that amounts to nearly 6% of the company’s overall outstanding shares.

General Motors notified the US Security and Exchange Commission in a filing that Los Angeles-based firm Capital Research Global Investors had agreed to purchase 92 million shares of GM stock, giving them roughly 5.8% of the American automaker. At the listed price during the time of the sale ($25.40/share), those 92 million shares would have cost Capital Research Global Investors around $2,336,800,000 – that’s $2.3 billion for those who don’t want to do the figuring on their own. This announcement comes as part of the SEC law that requires publically traded companies to inform the feds anytime a company is moving more than 5% to a new owner.

The fact that a massive and successful financial group like Capital Research is willing to set aside that kind of money for General Motors stock should spell good things for GM and GM’s current shareholders – including the US government. GM stock is down around 45% from one year ago, causing many to show concern for the American automaker but with a global lead in sales through 2011 and the recently announced profit of almost $8 billion dollars, shareholders may look to stay the course to see how the company grows in the next year. Also, the fact that Capital Research is willing to invest $2.3 billion may lead other investors to show more confidence in GM and when more people want to buy a given stock, the price is driven up.

Many speculators in the investment industry as well as the automotive industry analysts expect things to continue to improve for General Motors (and the other American automakers) as the US economy continues to slowly grow. The American auto industry had a great year in terms of growth and volume in 2011 and many expect 2012 to follow those same trends with an influx of attractive and efficient vehicles hitting the US dealerships. GM has continued to offer newer inexpensive, efficient compact models like the new Chevy Sonic and upcoming Chevy Spark while continuing strong sales with the likes of the Chevy Cruze.

In addition to being good for investors, the growth of GM stock price is good for the US government, who currently holds around 26% from the results of the 2009 “bailout loans”. Many Americans expect to see that ownership converted into the money owed from those loans but for that to happen – the government would need to sell their stock at a price of $53 per share to break even. With a price in the $25 dollar range, $53 is a long way off but if sales continue to improve through 2012 for GM around the world, it isn’t impossible to see prices reach that level in the future.