Would Romney dump GM shares on Day One? Don't count on it
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Republican presidential nominee Mitt Romney has vowed to quickly sell the U.S. Treasury's stake in General Motors if he's elected.
Analysts say that suddenly dumping the government's 500 million GM shares -- nearly one-third of the company's outstanding shares -- would depress GM's stock price. But they also think it's unlikely to play out that way if Romney takes office in January.
Morningstar analyst David Whiston says, "An immediate dumping into the open market of the government's entire stake" would depress GM's shares in the short term.
"But Romney is a businessman," Whiston says. "You're much more likely to see a gradual, orderly sell-off."
Analysts figure that either a Romney or Obama administration would follow the playbook that the U.S. Treasury has used to unwind its massive stake in insurance giant American International Group Inc., which is being sold in chunks.
Many analysts also believe that GM will use some of its $33.6 billion in cash and marketable securities to buy some Treasury shares, regardless of who is president. That could blunt the negative effect of any big government sell-off, analysts say.
GM's shares were trading at about $23.25 late Friday, Oct. 26, making the Treasury shares worth roughly $116.3 million.
If a future President Romney makes good on his intentions to quickly rid the government of its entire GM stake, it could create a nice buying opportunity, Whiston says.
"In the long run," he says, "investors who bought GM after a big sale like that could do quite well."
You can reach Mike Colias at mcolias@crain.com.
