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Treasury watchdog: GM stock needs to hit $133.78 to break even

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Treasury watchdog: GM stock needs to hit $133.78 to break even

David Shepardson / Detroit News Washington Bureau

Washington -- The Treasury Department's special inspector general says the government needs to get $133.78 per share for its 61 percent stake in General Motors Co. to break even on its nearly $50 billion bailout.

The Detroit News reported Saturday that the Treasury needs about $131 per share on its GM investment.

The difference between the two figures is that Neil Barofksy, the Treasury special inspector general, didn't include the value of dividends and interest that GM has already paid to date -- about $719 million.

That translates into $2.36 a share -- meaning that if you include that the government would need $131.42 a share to break even as part of its $49.5 billion bailout in GM.

The $133.78 figure was disclosed in a two-page letter to Sen. Charles Grassley, R-Iowa, that was obtained by The Detroit News today.

The government holds 304,131,356 shares of common stock. It also holds $2.1 billion in preferred stock.

The Detroit automaker plans to launch its IPO by the end of the year and hopes to mount a worldwide roadshow soon after the Nov. 2 midterm elections.

Separately, Barofsky -- who is the watchdog over the $700 billion Troubled Asset Relief Program -- told Reuters he will audit GM's IPO.

"I think it's important for us to do effective and quick audit work so we can learn the lessons from this IPO and make sure that they're applicable for the subsequent IPOs," Barofsky said.

A spokesperson for Barofsky, Kris Belisle, confirmed his comments.

Grassley asked Barofsky in August to investigate GM's planned IPO whether Treasury was working to get the "highest possible return." He asked the Treasury to investigate GM's planned $3.5 billion acquisition of subprime Texas-based lender AmeriCredit.

From The Detroit News: http://detnews.com/article/20100922/AUTO01/9220422/1148/auto01/Treasury-watchdog--GM-stock-needs-to-hit-$133.78-to-break-even#ixzz10InF7I4q

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Government needs $133.78 a share to recoup GM money, auditor says

By GREG GARDNER

FREE PRESS BUSINESS WRITER

Shares of General Motors common stock will need to sell at an average of $133.78 each for taxpayers to recoup the full $39.7 billion that the government invested for 61% of the automaker’s equity, according to a letter to Sen. Charles Grassley, R-Iowa, from the chief auditor of the Troubled Asset Relief Program.

“This figure does not include the underwriting, legal and other costs that Treasury will incur in connection with the initial public offering will cover,” wrote Neil Barofsky, special inspector general for TARP. The letter was dated Aug. 30, but was released today by Grassley’s office.

The letter also stated that Barofsky’s office will review GM’s proposed acquisition of AmeriCredit, the Texas-based finance company for which GM has offered $3.5 billion.

Grassley asked for the analysis that would show a price from GM’s initial public offering at which taxpayers will break even. He also wanted Barofsky to explain the Treasury Department’s role in reviewing or approving the AmeriCredit acquisition.

Less than half the Treasury Department’s 304 million GM shares are expected to be sold in November after the company conducts a series of presentations to investors in a variety of countries. The other GM shareholders, which include the UAW’s Voluntary Employee Beneficiary Association, the government of Canada and former bondholders of pre-bankruptcy GM, have not disclosed whether they will sell any shares.

It will take months and perhaps years for Treasury to sell all its shares. So the first-day price will not allow anyone to conclude whether or not taxpayers will recoup their total investment.

After the initial public offering, all shareholders are free to buy and sell as they choose. GM earned $2.2 billion in the first half of this year. Depending on its financial results in coming quarters, the price could rise or fall.

Barofsky’s calculation of the $133.78 price to break even did not include $7.5 million that will be paid to advisory firm Lazard or payments to the investment banks underwriting the offering. Treasury has agreed to pay those banks 0.75% of the proceeds.

GM’s historic stock price peak was $94.63 reached in April 2000 when the automaker was posting large profits not just from the sale of high-priced SUVs and pickup trucks, but from the auto and mortgage lending operations of its former subsidiary GMAC, now Ally Financial.

Read more: Government needs $133.78 a share to recoup GM money, auditor says | freep.com | Detroit Free Press http://www.freep.com/article/20100922/BUSINESS01/100922079/1210/business01/Government-needs-133.78-a-share-to-recoup-GM-money-auditor-says#ixzz10IooyMKC

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TREASURY: GM STOCK MUST TOP $130 TO RECOUP BAILOUT MONEY

By Mark Kleis

The upcoming General Motors initial public offering (IPO) has drawn a significant amount of attention, most recently with some warning that foreign investors may take a substantial share of GM, and other talk centering around the necessary offering price in order for the government to recoup its investment in the automaker.

By now it is no secret that taxpayers helped contribute over $60 billion in order to save GM and Chrysler in 2009, with some $50 billion of that being swapped for a 61 percent ownership stake in GM.

Now, as GM prepares for its IPO, the math has been done and it has been revealed that the stock will need to sell at $131.42 per share just for the government to break even, according to a letter sent by Treasury Department inspector general Neil Barofsky, and obtained by The Detroit News. The letter was sent to Senator Charles Grassley, a Republican from Iowa, and it outlined a figure of $133.78 per share, not including the $719 million in dividends already paid, and resulted in a final IPO price of $131.42. Grassley had requested the letter by suggesting that it was important for the IPO to provide "the highest possible return" for taxpayers.

Barofsky also told Reuters that he plans to audit the GM IPO in order to make sure everything what it should be. "I think it's important for us to do effective and quick audit work so we can learn the lessons from this IPO and make sure that they're applicable for the subsequent IPOs," Barofsky said.

Chinese-based SAIC may seek ownership stake in GM

To further complicate the matters surrounding the IPO of GM, many have also voiced concern that the offering will allow foreign investors to take a large stake in GM, benefiting from American taxpayer's money that was used to keep the company afloat. Obviously, this is a double-edged sword, as limiting investors will in turn drive the stock price down, which will in turn reduce the return on investment. The conundrum is as clear as it is unavoidable.

Enter Shanghai Automotive Industry Corp. (SAIC), China's largest automaker, which has Chinese government backing and funding. SAIC has said that it "may" invest in GM at the IPO. "China's largest carmaker will consider investing in GM if conditions are favorable," said SAIC chairman Hu Maoyuan.

This tie-up would not be the first between the two automakers, as GM have been working together in the Chinese market for over ten years. "GM is our important strategic partner," Hu said. "We are not clear about the details of its IPO. We will make the right decision once we know details."

Despite concerns and debate by many suggesting that the Treasury should limit foreign investment in GM, The Detroit News says that the Treasury has officially determined that it will not be involved in the allocation or limiting of shares - opening the door for investors such as SAIC to buy stock as they please.

link:

http://www.leftlanenews.com/treasury-gm-stock-needs-to-sell-at-130-to-recoup-bailout-money.html

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Report: U.S. breaks even if GM stock hits $133.78

by Zach Bowman (RSS feed) on Sep 23rd 2010 at 2:02PM

According to Neil Barofsky, the treasury department's inspector general, in order for the U.S. government to break even on its investment in General Motors, the company's stock will have to hit at least $133.78 a share. Thanks to the massive auto industry bailout, the government currently holds a total of 304 million shares of common stock and $2.1 billion in preferred stock in the automaker. According to The Detroit News, Barofsky has said that he will keep a close eye on the GM IPO in order to get the best return on the tax payer's investment possible.

But will GM stock hit the magic number? Some analysts seem to think so. There's some buzz that when GM goes public, its stock will be worth well over $100 per share. The company has already begun to make noise indicating that soon after the November 2 elections, it will begin a campaign to build interest in its IPO, so anything's possible.

link:

http://www.autoblog.com/2010/09/23/report-u-s-breaks-even-if-gm-stock-hits-133-78/

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Make a speculation and then blow the trumpet.

The $133.78 figure was disclosed in a two-page letter to Sen. Charles Grassley, R-Iowa, that was obtained by The Detroit News today.

Grassly and Issa are the main trumpet blowers against GM, so the authenticity of this price should be doubted.

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Make a speculation and then blow the trumpet.

Grassly and Issa are the main trumpet blowers against GM, so the authenticity of this price should be doubted.

What speculation? $39,700,000,000 / 304,000,000 shares = $~130/share.

I can't say that I have confirmed that the $39.7B or the share count is accurate, but those seem to be public numbers.

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What speculation? $39,700,000,000 / 304,000,000 shares = $~130/share.

I can't say that I have confirmed that the $39.7B or the share count is accurate, but those seem to be public numbers.

I need not say more. Pre bankruptcy share count has nothing to do with post bankruptcy share count.

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And if one was to divide the number of shares by 10, then the title would read Treasury watchdog: GM stock needs to hit $1337.8 to break even

Gotta love arithmetics :P

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And if one was to divide the number of shares by 10, then the title would read Treasury watchdog: GM stock needs to hit $1337.8 to break even

Gotta love arithmetics :P

Mathematical Jugglery at its best.

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