Sweetheart deal: Board member gets a premium priced buyback

In the private sector, this would be be grounds for a perp-walk.

But, not in government world, I guess.

The headline: GM to Buy Back Stock From Treasury

The story:

General Motors (aka. Government Motors) announced that it will purchase 200 million shares of stock held by the U.S. Treasury Department.

The auto maker will pay $5.5 billion for the shares.

The repurchase price of $27.50 a share represents a 7.9% premium over the closing price on Dec. 18.

After the repurchase, the U.S. Treasury will continue to own approximately 300 million shares of GM common stock, or approximately 19% of the outstanding shares on a fully-diluted basis.

GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.

OK, let work through the pieces …

Even at the inflated price, since the Feds bought i at the $33 IPO   taxpayers will incur a trading loss of $5.50 per share … totaling to $1.1 billion.

image

GM’s largesse in premium pricing the deal “saved” taxpayers about $400 million.

Keep in mind, this is hardly an arm’s length transaction.

And, we the people still own 300 million shares … representing a paper loss of another $2 billion.

Gentlemen start your engines …

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