One thing to savor about Treasury’s plan to get out of GM is how many corporate-governance hot buttons it gently caresses. “GM will purchase 200 million shares of GM common stock from Treasury at $27.50 per share” translates into news reports as “Treasury is losing a bazillion dollars,” since after all Treasury paid rather more than $27.50 per share originally, but there are other ways to look at it. One is that Treasury seems to have agreed a deal with GM after the 12/18 close at $27.50 for a stock that had closed at $25.49 and hasn’t touched $27 in ten months; i.e. GM overpaid for stock from a favored/nudgy insider by $400mm. Normally, privately negotiated buybacks from favored shareholders at a premium to market prices are criticized. Normally, privately negotiated buybacks from nudgy, “ooh-don’t-buy-a-corporate-jet” activist shareholders are called greenmail.
That doesn’t mean such buybacks aren’t market-pleasing, by the way. Much like Buffett’s recent slightly-above-market buyback, GM’s above-market buyback seems to have boosted the stock. Delightfully part of the boost is accounting-related. From the Journal: Read more »
