You’d think that people with access to Insider Trading would make a better deal for taxpayers. If anyone needs to know how good the government is at investing our tax dollars, they might want to take a look at GM.
In order for the taxpayer to get their money back on GM stock, the shares would have to be sold for $53-$55 per share. The high for GM stock for the year is $39.48. Today it was selling for $20.75. Market Watch
Meanwhile, Obama is trying to claim that GM’s “profit” of $3.2 million is proof that the bailout has been a huge success.
Reason.com GM got Uncle Sam’s special bankruptcy package that allows it write off up to $45 billion of old losses going forward. That puts its total bailout at up to $75 billion*. Even that’s not all. The Treasury gave GM $10 billion of the $60 billion as a loan; the rest was through the purchase of equity. (It has more or less paid back the loan.)
The equity means two things: One, GM has zero interest payments, something that gives it a distinct advantage over competitors. Ford, by contrast, had to pay $251 million in debt-service costs. Despite this, GM’s real per vehicle margin was over $1,000 less than Ford’s, thanks to the heavy incentives it was forced to give buyers. (If the administration can call this success, can it please call me the next American Idol?)
And two, taxpayers have no guaranteed return as they would have with a loan. Therefore, market valuation of GM’s stock will determine what they will recover. They got back $20 billion when the Treasury sold half of its equity when GM floated its first post-bankruptcy IPO in December. But that still leaves a $30 billion shortfall (excluding the $45 billion tax break). To get this back, the federal government would have to sell its remaining 365 million shares—about 26.5 percent of company equity—for about $55 per share.