DETROIT (AP) — General Motors, trying to clear the stigma of being partly owned by the U.S. government, will spend $5.5 billion to buy back 200 million shares of its stock from the treasury.
The government, in turn, promised to sell its remaining 300 million shares on the open market starting in January, and get out of the company's business within the next 12 to 15 months.
GM said Wednesday that it will pay $27.50 each for the 200 million shares, and it expects to close the deal by the end of the year. GM stock closed Tuesday at $25.49, and it shot up 7.1 percent in premarket trading Wednesday to $27.30.
"This is fundamentally good for the business," GM Chief Financial Officer Dan Ammann told reporters at a hastily called news conference Wednesday morning. He added that GM has market research showing that the government ownership has held down sales of the company's cars and trucks.
The government got its shares of the company as part of a $49.5 billion bailout of GM that began nearly four years ago, a bailout that saved GM from collapsing into financial ruin.
The move leaves the government with 300 million shares, which it pledged to sell "in an orderly fashion" within the next 12-15 months, subject to market conditions.
GM's purchase of the 200 million shares still leaves the government about $21 billion short of breaking even on its investment. To break even, the government would have to get nearly $70 each for its shares.
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