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With GM stock prices dropping to below the IPO sale price, sources are speculating that the US government may sell off a substantial portion of their remaining holdings in the company. According to Reuters [2], unnamed sources claim the US government will sell a large number of shares of its current 33% percent stake in GM during the first half of August or after Labor Day. These claims seem to be at least credible on the timing of the sale; the IPO agreement mandated that further stock sales were not permissible before May 22, 2011.
At the close of the market on Tuesday, GM stock had dropped to $29.97 from the IPO price of $33 per share. According to a statistic from the Wall Street Journal, the government would have to sell their remaining shares at $53.00 each in order to break even. A source told Reuters, that it is possible that a sell-off could happen as early as June and that there is potential for another sale in November or December. Some claim that the US government is willing to endure the loss in order to be free from GM before the 2012 election. Although the politicians are not likely to directly feel the impact of stock losses personally, the losses sustained may impact their reelection bids. Depending on the outcome (and the validity information regarding the stock sales) this could be a successful political move or an epic failure. Regardless of the impact on reelection campaigns, GM is expected to show a first quarter profit.