Seeking Alpha

General Motors (GM) announces it will spend $5.5B to buy back 200M shares from the U.S....

General Motors (GM) announces it will spend $5.5B to buy back 200M shares from the U.S. Treasury. GM +6.6% premarket.
From other sites
Comments (26)
  • patron
    , contributor
    Comment (1) | Send Message
     
    EINHORN IS RIGHT AGAIN.ON THE WAY TO 35-37
    19 Dec 2012, 08:14 AM Reply Like
  • vallies
    , contributor
    Comments (351) | Send Message
     
    F is getting a pop off of this and with a P/E under 3 and a PEG at .5, I was hopping to pick up either of these two at lower prices. It's the Tepper round two and with his comments on the autos, maybe it is time to just scale in. PGR has been sitting at the 19. to 21. level for way to long. I am going to check value.
    19 Dec 2012, 08:24 AM Reply Like
  • marketman54
    , contributor
    Comments (823) | Send Message
     
    Oh happy days! WE ONLY LOSE 50 cents on the dollar. FU GM
    19 Dec 2012, 08:37 AM Reply Like
  • chopchop0
    , contributor
    Comments (3422) | Send Message
     
    exactly. Not like GM will buy it anywhere close to the IPO price (or at $50+ where it needs to trade in order for the federal government to break even).
    19 Dec 2012, 09:07 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    I can only imagine how much inside trading & leaking took place on this deal.

     

    Election over, curious timing, no?
    19 Dec 2012, 08:50 AM Reply Like
  • luckycharlie
    , contributor
    Comments (228) | Send Message
     
    GM does seem undervalued to me... not surprising the company would be willing to do this, though I'm not sure why the govt would do it (I guess they just want it off the books?)
    19 Dec 2012, 09:10 AM Reply Like
  • Malvo
    , contributor
    Comment (1) | Send Message
     
    John Q. takes it in the wallet...again
    19 Dec 2012, 09:24 AM Reply Like
  • BlueCollarBlueDog
    , contributor
    Comments (97) | Send Message
     
    Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government's breakeven price of $54. So much for the "profit" spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers.

     

    http://bit.ly/WrScYC
    19 Dec 2012, 11:44 AM Reply Like
  • Devilmaydare
    , contributor
    Comments (82) | Send Message
     
    When the Federal government is completely out of GM it will have
    lost $10 billion or less on it's investment. When one considers the untold billions that the Federal and State governments saved by keeping several hundred thousand people working for these years,
    the government's investment was a bargain.
    19 Dec 2012, 12:03 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    Devil,

     

    "will have lost $10 billion or less on it's investment"

     

    How do you know that? Where's your proof?

     

    How many times have airlines gone bankrupt in this country? Do we still have airlines?

     

    It's thinking like that that has given us the crappy economy we now have. This is not a free market economy and if you are politically connected you get payoffs from the man in charge transferring money from my pocket to the pocket of the unions.

     

    Sorry but there is nothing fair, reasonable, or honorable in being the beneficiary of corporate welfare.
    19 Dec 2012, 12:07 PM Reply Like
  • Devilmaydare
    , contributor
    Comments (82) | Send Message
     
    Dear GaltMachine,
    If you would spend a minute to do the calculations, you will find that the breakeven point for the Government would be about $53 per share. They lost about 1/2 or about $5.5 billion on this first sale of
    200 million shares. The remaining 300 million shares when sold will sell at a much higher price than $27.50 as GM keeps going up. Even if GM doesn't go up at all from $27.50 then the Government would lose $7.65 billion if it sold the remaining 300 million shares. This together with the $5.5 billion lost on the sale of the first
    200 million shares yields a maximum loss by the government at today's price of $13.15 billion. GM's stock price will continue to rise over time and GM will most likely buyback the remaining
    300 million shares at a premium just as it has done with the first
    200 million share purchase, so the final tally should be a loss
    of significantly less than $13.15 billion. People need to stop crying in their milk and move on. GM for whatever reason is currently a wonderful investment opportunity. Don't let bitterness blind you to the current strength of GM.
    19 Dec 2012, 12:17 PM Reply Like
  • luckycharlie
    , contributor
    Comments (228) | Send Message
     
    I'm under the impression there are 500 million shares out, this clears 200 million of that and the government breakeven moves up to about $70 for the remaining 300 million.

     

    With the announcement that shares will be sold in 2013, the stock will probably idle until the govt announces more has been sold.

     

    In other words the threat of a big seller (under a deadline) is not a compelling reason to go buy the stock. Of course the flipside of this is that the market has been "sandbagging" the govt, holding shares and waiting for the government to puke out of its position.
    That implies that everybody knows GM is worth more, but why not bleed the government some more?
    19 Dec 2012, 03:46 PM Reply Like
  • Devilmaydare
    , contributor
    Comments (82) | Send Message
     
    Bondholders expected a good return with no risk ?? Pie in the sky.
    There is no such thing. They placed their bets and they lost in this case. The bondholders should have done due diligence before
    plunging in.
    19 Dec 2012, 11:13 PM Reply Like
  • chopchop0
    , contributor
    Comments (3422) | Send Message
     
    The bondholders probably didn't expect a sweetheart deal to the UAW to trump their interests
    19 Dec 2012, 11:30 PM Reply Like
  • bronto
    , contributor
    Comments (7) | Send Message
     
    Devilmaydare is right on target. This investment kept people working and off unemployment andsaved the company. Easy Math.
    20 Dec 2012, 12:03 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    Devil,

     

    "so the final tally should be a loss of significantly less than $13.15 billion."

     

    My god, you actually think this is a tiny amount of government welfare. The idea that we would transfer wealth by force from on taxpayer to another would have been considered political death in any other era of our history. Destroying bondholders' right and trampling over centuries of creditor's rights in order to pay off a union would have been unfathomable just a few short years ago.

     

    Yet apparently to you and to many beneficiaries of corporate largesse it's no big deal.

     

    I will never buy a GM car again.

     

    You may enjoy making money this way but it turns my stomach so good luck with your investment.
    19 Dec 2012, 12:39 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1670) | Send Message
     
    GaltMachine, why is it that $600B+ a year in defense spending (and containts A LOT of waste) that props up defense contractors isn't considered government welfare? I thought we were for smaller government, no? Oh wait...except in the parts where we want a bigger government. Yeah.
    19 Dec 2012, 09:37 PM Reply Like
  • chopchop0
    , contributor
    Comments (3422) | Send Message
     
    Who's to say GaltMachine doesn't agree with you? I am guessing by his handle that he has libertarian leanings. Most libertarians would love to scale down the defense spending in this country.

     

    We spend more on defense than the next several nations COMBINED
    19 Dec 2012, 10:16 PM Reply Like
  • caupachow
    , contributor
    Comments (394) | Send Message
     
    Galt, all I've ever owned for me personally is GMC trucks/suv's. I'm never buying a union made vehicle again. How many people in the SA community would buy GM bonds regardless of their political leanings?
    20 Dec 2012, 12:30 AM Reply Like
  • chopchop0
    , contributor
    Comments (3422) | Send Message
     
    Only a fool would buy GM bonds again....
    20 Dec 2012, 06:25 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    chop,

     

    Interesting. I am truly amazed at the level of sheer ignorance being displayed about the way the GM bailout was carried out.

     

    It is either purposeful and politically motivated or just based upon a lack of study either way it's a bad sign for the future of our economy.

     

    Our economy works on debt - debt is a promise enforced by the power of law and centuries of experience - bonds are debt. People give companies money on the expectation that laws will be upheld and enforced to protect everyone's interests which is how the interest rate on the debt is calculated and the resultant yield develops once the instrument trades.

     

    I am not sure people truly understand how massive the bond market is and how it completely dwarfs the equity markets. You start screwing around with bondholder's rights and you are going to put the future of economic growth at risk.

     

    When a government can STEAL money from GM bondholders (little old ladies and men, state/federal/private pension funds, insurance companies, average non-union joes, etc.) to give to a politically connected group like the UAW it makes you wonder what country we actually live in?

     

    FYI, devil there is no way to put a "risk premium" on having your money stolen by the government so take some time and really examine the issue to understand how disgustingly corrupt the GM bailout process was. However as a likely Obama voter, I can only assume you really don't care because the end justifies the means.

     

    I don't roll that way.

     

    The GM debacle is the kind of thing that happens in banana republics like Venezuela where they just decide to nationalize industries and screw the owners.

     

    Government Motors did go through bankruptcy in case you missed it, it just happened to be a banana republic style reorganization that made a laughingstock of our laws.

     

    Buy your POS Government Motors vehicle, but I for one hope they fail.

     

    Pro-Ford, pro-Honda, pro-Toyota, pro-BMW, pro-Mercedes, etc all of which are also American car companies and didn't have the benefit of being cronies who got paid off to support the President.

     

    Rant over. Feel better. Thank you.

     

    Have a nice day!
    20 Dec 2012, 01:38 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1670) | Send Message
     
    "Government Motors did go through bankruptcy in case you missed it, it just happened to be a banana republic style reorganization that made a laughingstock of our laws."

     

    If GM had been left in bankruptcy without the government stake, credit markets were STILL FROZEN. The private sector couldn't have gotten it done.

     

    Remember? That's why the Fed had to step in to save all the banks in the first place? Credit crunch.

     

    Also, do you not use a bank either because just about every single one took bailout money from the Federal Government? Is that not welfare?

     

    Just sayin....if you're gonna take the morally superior road on autos, you should do the same in all areas of your life, not just the ones you find convenient.
    20 Dec 2012, 02:00 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1670) | Send Message
     
    Also, how come you fail to address the $600B in defense spending as welfare for the defense industry? Someone above mentioned you might agree....however, you were a 100% in support of Romney which means you had no problem with his views on expanding America's military even more. How is this "small government"? Let me spell it out for you...it's N-O-T. So quit masquerading that you want a smaller government.

     

    Fact of the matter is, neither the GOP nor the Democrats want smaller government (each wants a bigger government in the areas it favors)....the difference is that the Democrats admit it, the GOP still pretends that it does. But actions speak louder than words.
    20 Dec 2012, 02:05 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    IDK,

     

    "Just sayin....if you're gonna take the morally superior road on autos, you should do the same in all areas of your life, not just the ones you find convenient"

     

    This was a story about GM so was my comment. You should learn to focus.

     

    It's true what they say about psychological projection. You are arguing with yourself.
    20 Dec 2012, 04:07 PM Reply Like
  • luckycharlie
    , contributor
    Comments (228) | Send Message
     
    Its the unions fault? Hard to rationalize that....

     

    According to Forbes, virtually all German autoworkers are union members and they make TWICE as much per hour (incl benefits) as American autoworkers.

     

    Something like 67 bucks an hour to 33.

     

    So blaming the unions seems faulty (at best).

     

    I hope you like Asian cars, if you won't buy union.
    20 Dec 2012, 06:50 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1670) | Send Message
     
    Galt, you make such broad sweeping statements with what I view as extremist actions like avoiding GM cars forever (ok, w/e to that) and hoping that they burn to the ground because they took government money.

     

    Following that logic, if you are THAT fervent about GM, you should be about all the industries that have received government bailing $$ in the past 5 years.

     

    I'm not arguing with myself....I'm asking you to fess up and admit that you are just picking and choosing to be extra-morally superior only in certain areas while neglecting others (i'm calling you out on being a hypocrite)
    20 Dec 2012, 10:35 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector