The stock price of the General Motors Company (NYSE:GM) climbed by more than 4% to $38.30 per share in the mid-afternoon trading in New York on Tuesday after the United States Treasury Department reported to Congress that it sold $1.2 billion worth of shares in the automaker in October.
Government following through on plan to unload shares
In June, the Treasury Department sold its 30 million shares in General Motors Company (NYSE:GM). As of September 26, the United States government owned 101 million shares or 7% stake in the automaker. The agency did not specify how many shares were sold recently, but market observers are speculating that the stake of the government in the automaker is now less than 4%.
The Treasury Department previously indicated its plan to sell the entire stake of the government in the automaker early next year. The United States government acquired a 60.8% stake in General Motors Company (NYSE:GM) after providing $49.5 billion in bailout money under the Troubled Asset Relief Program (TARP) during the financial crisis.
According to the agency, the United States government already recovered $37.2 billion out of the $49.5 billion bailout money provided to the automaker. The government still needs to recuperate $12.3 billion of the taxpayer’s money.
In a note to investors, Michael Ward, analyst at Sterne Agee wrote, “We believe the exit will be complete by year-end, which, in our view, is a positive catalyst for the stock.”
General Motors could begin dividend payment
On the other hand, Buckingham Research analyst Joseph Amaturo opined that the government’s exit in General Motors Company (NYSE:GM) will pave the way for a dividend payment or a bigger shares repurchase program.
He believes that the automaker has the financial capacity to repurchase the remaining shares held by the U.S. government to end its implemented executive pay limit. He projected that the board of directors of General Motors Company (NYSE:GM) might be able to begin paying an annual dividend of $0.80 per share early next year.
The two analysts recommended a Buy rating for the shares of the automaker with a $50 price target. Over the past 12 months, the stock price of General Motors Company (NYSE:GM) increased from $23.39 to $38.50 per share, which was driven by its strong financial results, and new product introductions as well as the potential exit of the U.S. government from the automaker’s business.