Business - Treasury gets $11.7 billion from recent GM stock sale

By Martin Crutsinger AP Economics Writer WASHINGTON (AP) -- The Treasury Department says it has received $11.7 billion from the sale of 358.5 million shares of General Motors stock. Treasury announced that the net proceeds from the GM stock sold last week were delivered on Tuesday. Treasury officials said that the government could receive an additional $1.8 billion assuming the bankers exercise options to purchase an additional 53.8 million shares of GM common stock within 30 days of the initial stock offering. The government put $49.5 billion into GM as part of its bailout of the giant automaker. In addition, Treasury said it will receive another $2.1 billion from GM when the automaker repurchases preferred stock that was issued under the government's $700 billion Troubled Asset Relief Program. That sale is supposed to take place in December. The $11.7 billion in net proceeds represented the amount the government received after subtracting fees paid to the banks which handled the initial public offering. In the IPO, GM's owners -- mainly the U.S. government -- sold 478 million shares at $33 each. The stock traded as high $35.99 on the first day of trading last Thursday before settling with a gain of 3.6 percent at $34.19 for the day. On Tuesday, GM shares followed the broader stock market down to close at $33.25, off 83 cents, or 2.4 percent, from Monday's close. Such volatility is normal for stock in the days following an initial public offering, especially one the size of GM's, said Scott Sweet, managing partner of IPO research firm IPO Boutique. The conflict between North and South Korea, he said, is causing jitters in all segments of the stock market in a light trading week due to the Thanksgiving holiday, he said. "There are few safe havens," Sweet said. "A geopolitical event such as the Korean situation is a highly combustible lightning rod to a market with little holiday liquidity." GM's stock slipped perilously close to the IPO price of $33, which could trigger computerized "stop loss" orders from bigger investors. Analysts say the investment banks that ran the deal likely would persuade larger investors to step in before it got to that point. The banks are prohibited from buying the stock themselves by Securities and Exchange Commission rules until it hits the IPO price. TARP was used to stabilize the financial system and prop up numerous banks, auto companies GM and Chrysler and insurance giant American International Group. "General Motors' successful initial public offering is another important milestone in our efforts to recover TARP funds on behalf of the American taxpayer," Tim Massad, Treasury's acting assistant secretary for the bailout program, said in a statement. With the receipt of the $11.7 billion from last week's sale of GM stock, Treasury said that a total of $252.1 billion has been returned to taxpayers from the TARP program. Reflecting a stabilization of financial markets, Congress earlier this year voted to reduce the original $700 billion authorization for TARP down to $475 billion. Last month, Treasury projected government losses from TARP would total $50 billion based on current market prices and its projection of the revenue it will receive from a restructuring of AIG. Republicans have criticized the TARP program as an example of a bloated federal government that needs to be brought under control. However, the Obama administration contends that the TARP program, which was developed during the Bush administration, was critical to stabilizing the financial system and keeping the recession from being even more severe. ---------- AP Auto Writer Tom Krisher in Detroit contributed to this story. Published: Fri, Nov 26, 2010