GM stock sees highest value in over two years, finally tops IPO price
As this article hits the net, General Motors stock is trading at $33.62 with today’s high price being $33.67 as of 2:45pm eastern standard time. Throughout the day, the price has been hovering between $33.40 and $33.65 and should GM stock close above $33 – this will be the first time that it has closed above the IPO price since March 3rd 2011. Beginning in March 2011, GM stock entered a 17 month long downward spiral that would continue through July 25th 2012 when the closing price bottomed out at an abysmal $18.80. However, over the course of the past 9 months since that dark day in July 2012, the GM stock prices have gradually increased and today could be the day where GM stock finally closes above the $33 IPO price.
The increase is GM stock value is due to two major factors – an influx of popular, attractive new models and the fact that the government is looking to remove itself from the equation by selling off its stake in the automaker. Over the past 9 months since the stock price bottomed out, GM has introduced a long list of hot new models with the most recent addition to that list being the new Chevrolet Silverado and GMC Sierra. GM’s trucks have always been their bestselling vehicles so the increase in consumer interest with the new models has a positive impact on the stock price. At the same time, GM has faced the “government motors” stigma over the past few years and many investors are not interested in putting their money in a company that is run by the US government – after all, the US government is trillions of dollars in debt. With the government looking to remove itself from the equation, investors see less chance of the feds asserting their authority and forcing the company to make bad decisions. Fortunately for the automaker, the investors and the government – the Treasury has made it very clear that they want to sell off all GM ownership and that has helped the stock price climb.
While General Motors stock price rise over the past 9 months means very good things for both the investors and the company itself – this is also good news for every American taxpayer. As we all know, General Motors issued a large number of shares to the US government as repayment for the multibillion dollar “bailout” loans in 2009. When the US treasury received all of that GM stock, they did so at a price of $33 per share. As the selling price drops below that $33 IPO price, GM effectively loses money on every share sold. Say that GM sells a thousand shares for $30, even though they bring in $30,000 they have done so by selling $33,000 worth of stock based on the issue price. Unfortunately, GM has sold a large number of shares at a price well under the $33 IPO price and in doing so – both the government and the taxpayers lost literally millions of dollars. However, now that the GM stock price has risen above the $33 IPO price, the government will effectively be “making money” on every share of stock sold at these higher values.
I should point out that in order for the government to break even on the bailout loans through the sale of its GM stock, the price would have to rise into the area of $75 per share and that really isn’t realistic. The bright side to this whole situation is that with GM’s stock price finally exceeding the IPO value, the government can recuperate some of the money lost via the bailout loans. The Treasury Department owned around 241.7 million shares of GM stock (16.4% of outstanding GM stock) so if the price of the stock rises to $35 per share before the government was to liquidate ownership of General Motors, the feds would stand to make back almost $500 million. Granted, the government does not plan to flood the market with GM stock as that would likely have a negative impact on the stock value but the feds have made it clear that they want to be rid of its ownership in GM within the next year or so.
In theory, as more new GM models hit the market and sales numbers continue to climb - coupled with the government's continued efforts to sell their stake in the company - the stock price could continue to rise over the next few months. At the same time, the stock market is a tricky game and it is impossible to predict how certain stocks will rise and fall.