Canadian and Ontario governments have sold very little of their stake in GM making for a better financial situation.
Last week, we ran a story about the US Treasury needing an astronomically high GM common stock price in order for the government body to break even on their investment.
Since then, we have been curious: at what stock price can the Canadian and Ontario governments break even on their $11.2 billion investment in GM?
We spoke with media relations at the Department of Finance for the federal government for some clarification on their current ownership stake and also to set the record straight on the previous article.
We mentioned the Canadian and Ontario governments have yet to sell any of their ownership in General Motors. However, that proves untrue, as they did sell a block of shares during the IPO. Those shares – 35,021,186 of them – were sold at $33 per share, giving the governments some $1,155,699,138 in cash. This means the governments’ current investment sits at around $10-10.1 billion. They have not sold any shares since the IPO.
Canadian public ownership of GM is split between two types of shares: common and preferred. Common shares closed Monday at $36.38; preferred shares closed at $50.28.
The Department of Finance was generous enough to provide their current ownership of shares rather quickly. The governments are currently sitting on 140,084,746 common shares and 16,101,695 preferred shares. Some basic math tells us these shares are worth a combined $5,905,876,284.08 as of yesterday’s close.
Given Ottawa’s current investment of $10 billion, it leaves tax payers roughly $4.1 billion short on the deal.
Now we get into some very speculative math.
Using some simple multiplication and division skills, stock prices need to come up roughly 69.5% for Canada and Ontario to break even, without including the costs of borrowing that money in the first place and all the administrative costs associated with government ownership.
From that we can derive that common shares need to be $62 and preferred shares at $85 before tax payers can even think of breaking even on their investment. That’s a lot better than the $95.51 common stock price needed by the US Treasury.
These stock prices are not meant to be exact (and they aren’t) but illustrative in where we are on General Motors ownership. We are in a much better spot financially versus our neighbours to the south, due mainly in part in waiting to see where the market goes.
However, it has been said a sale of the company by our government will not be a financial move, but political in nature. We’ll have to wait to see how that turns out.