President Obama’s big investment into General Motors is going to yield we the taxpayers a loss of billions of dollars. Many billions.
“The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock’s closing price on Tuesday,” the Detriot News reports.
However, the break even price — the price that GM would need to pay for each share in order to pay back the money the government put in to the company —is $53 a share.
That means, GM is saving more than $5 billion by buying back its stock now.
But it’s not just $5 billion taxpayers are out when it comes to GM. It’s many times more than that.
Treasury intends to begin its disposition of those 300.1 million common shares as soon as January 2013 pursuant to a pre-arranged written trading plan. The manner, amount, and timing of the sales under the plan are dependent upon a number of factors.” Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government’s breakeven price of $54. So much for the “profit” spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers.
Update: Linked by iOwnTheWorld – thanks!