Tomahawk, WI 9/24/2013 (BasicsMedia) – General Motors Company (NYSE:GM) has acquired a reputation which doesn’t do it any favors. It is one of the companies which were heavily affected by the financial crisis of 2008, and were it not for the U.S government’s decision to lend it some money, there is a general consensus that the company would be no more today. The money which the government lent to GM is yet to be paid back in full. Currently, GM is believed to owe the U.S taxpayer close to $16.4 billion. How it intends to repay this has been the major talking point for many years now.
GM Settling Debts through Sale of Shares
One way in which this money can be repaid in full, is to sell the shares currently held b the U.S Treasury. This has been going on, and when it was carried out in July 2013, close to $846.9 million was raised through this process. It may seem slow, but it remains one of the safest ways through which GM will get its business away from the taxpayers hands. This process of selling the shares held by the U.S Treasury in GM has so far netted close to $34 billion. But the company is still a long way from concluding the debt repayment process so that it is debt free.
The U.S Treasury is tasked with the job of helping the taxpayer to recover this huge amount of money which was lent to GM to bring it back to its feet at a time when it faced a period of real uncertainties regarding its future. The U.S Treasury has thus far done tremendously to recover the $34 billion it has managed to. This it has done through sales of stock, repayments, interest, dividends and other sources of income as well. The government poured $51 billion to bail out GM. Chrysler also benefited from similar bail out arrangements from the government.
GM Stock Must Double to Support Debt Repayment Quickly
If the government was to recover the remainder of the debt from sale of GM shares alone, it would need this stock to double. In 2013, the taxpayers have seen the shares they gold at GM fall from 300.1 million, to 241.7 million, and a further 211.7 million before the current amount believed to be in the region of 187 million shares. It has reduced because the U.S Treasury has been quite active selling these shares in order to pay back the amount of money which it lent GM as part of the bail out program.
If the government was to sell the remaining shares at the current price of $35.98 per share, it would only succeed in raising $6.73 billion. This would still be short of the $16.4 billion by around $10 billion. This has to be done by the end of the first quarter 2014, which is in accordance with the government’s schedule. Therefore, other sources of raising the money would need to be looked into if GM is to be debt free, at least from the debt it owes the government. The two bodies would need to sit down and find ways of going about this exercise.