Treasury to sell remaining GM shares

GM will repurchase 200 million shares of stock from Treasury as the government announces plans to sell its remaining stake in the automaker.

NEW YORK (CNNMoney)

Treasury said GM has agreed to repurchase 200 million shares by the end of this year for $27.50 a share, a 7.9% premium above Tuesday's closing price. Shares of GM (GM, Fortune 500) jumped 8% in premarket trading on the news.

"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said GM CEO Dan Akerson in a statement Wednesday.

Treasury intends to sell its remaining 300 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions. Sales could start as soon as January.

Related: Two very bright signs for GM

GM started to received the bailout funds in late 2008, with the bulk of the money being used to fund its operations during its 2009 bankruptcy reorganization.

The sale of GM stock is not likely to recover all the tax money the company received. After the repurchase of shares by GM, there will still be $21.6 billion of bailout funds yet to be returned to taxpayers. The average sale price in order for Treasury to break even would be nearly $72, or 182% higher than Tuesday's closing price.

Still, the bailout saved GM and the many suppliers who depended on it. The company has bounced back to earn record profits in 2011, as it recaptured its title of the world's leading automaker. It is hiring workers once again. Many economists argue that the bailout worked, even if taxpayers are not completely repaid.

"The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time," said Assistant Secretary for Financial Stability Timothy Massad.

First Published: December 19, 2012: 8:43 AM ET

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