By on October 6, 2012

Shares of General Motors held by the Canadian federal government and the government of Ontario may have difficulty unloading their $9 billion stake in General Motors, according to a report by Bloomberg.

The chief concern is that a sudden sale of GM stock in mass quantities would be a tough sell; expectations of “flat performance” and the sudden liquidation of the shares have sparked fears that demand would be weak.

Canada GEN Investment Corp, the entity responsible for overseeing the government stake in GM, is apparently hoping to sell the shares directly to GM itself. Matthew Stover of Guggenheim Securities LLC told Bloomberg

“They’ve got a ton of cash on their balance sheet, so I would personally imagine the company to be a big buyer of the stock.”

Unfortunately, most of the documents pertaining to the stock sale were censored, which makes it difficult to glean any further information or context. But Canada GEN seems to be betting big on GM’s willingness to buy back their stock.

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24 Comments on “Canadian Governments Hoping For GM Buyback Of Shares...”

  • avatar

    I have seen none of this item in any Canadian Newspaper that usually has lots of Business News, in any case I will keep an eye out for it, Monday is Thanksgiving holiday so will check it out on Tuesday.

  • avatar

    I read the link to the Windsor Star. This is how it works in Canada. Stephen Harper has a majority conservitive, federal government he can do what ever he wants. Jim Flaherty is Steves finance minister. Jim dosn’t break wind, unless Steve gives him the nod. Stephen Harper dosn’t pass gas without consulting with the USA. As I understand it, the good folks of America are having an election.

    SWFA…will happen till after the U.S. election.

    Ontario has a Liberal minority government. Dalton Mc has many problems,not the least of which is a staggering debt load. The auto industry is crucial to Ontario.

    No way, will Ontario sell its shares of GM, not now, or in the near future. The political fall out would bury the provincial Liberals.

    IF..and thats a big if,the share price was 35 dollars?..You might, see a chance of the Canadians selling off.

    It aint gonna happen now. Not in this political climate

  • avatar

    Maybe GM can hit the US or Canada governments up for a loan so they can buy those shares back.

    • 0 avatar

      Actually, GM does have tons of cash on its books and buying back those shares at the current valuation would indeed be a windfall for GM, but not for the Canadian federal government that would be getting back less than what they “invested”.

      And on the other side of the ledger there is the European connection that may drain off a lot of cold hard cash in the very near future.

      I fully expect the price and valuation of GM stock to RISE in the fall of 2013, right about the end of August 2013 as the hype and expectation curves of the new trucks, etc, intersect at the buying-public level.

      GM’s betting a lot on their new, improved, better than ever lines of vehicles for 2014 and sales to the general public of GM vehicles should actually increase based on demand driven by expectations.

      The success or failure for GM of these launches depends on getting more non-GM owners in North America interested in looking at their new offerings, and then choosing to buy them over what they drive now.

      And that may be a bit more difficult to achieve for GM since the foreigners, as a group, clearly have more market share than GM.

      Although GM is possibly (and probably) making the best vehicles they have ever made in their entire existence, the repeat customers for the foreigners clearly outnumber those turning to GM, by a wide margin.

      Unless these new 2014 models sell in astronomically large numbers, another bailout of GM in 2015/2016 is not out of the question. GM’s liabilities outweigh everything else they’ve got going for them.

      • 0 avatar

        2015, you think it could be so soon HDC? Not an accountant, but if GM has enough cash on their balance sheet couldn’t the ride it out a few more years on those cash reserves, assuming things head south of course.

      • 0 avatar

        28-Cars-Later, I believe it could be that soon even though GM may not be as broke by then as they were at the end of 2008.

        GM has learned its lesson from the bankrupture in 2009, and will ask for a bailout much sooner this time since Bush did not give them the bailout they wanted, but eventually got from Obama after March 31, 2009, when the Bush bailout expired.

        All the uncertainty about whether or not Congress would approve the Obama bailouts at that time put everything at GM pretty much on hold and behind the eight-ball.

        Once they got the money from Obama and Congress, they could press ahead from the standstill imposed on them by the Bush 90-day bailout funding.

        And the events unwinding in Europe cannot be ignored and must be costing GM a ton of money per minute. Some analysts see the Europe situation dragging on beyond 2016 because it takes time for austerity measures to take their effect across all the member nations.

        GM isn’t just North America. Money is fungible and whatever profits GM is making in North America can be spent just as quickly elsewhere in the world where GM is losing money.

        The key for GM in the 2014/2015/2016 time frame is to get more Americans interested in GM’s new line-up, and choosing to buy GM vehicles instead of those of the competitors.

        That means equaling or surpassing Ford sales in trucks, equaling or surpassing Toyota sales of Camry, while at the same time doing battle with the likes of the Chrysler 300, 200, Jeep Grand Cherokee, Honda Accord, Hyundai Sonata and Nissan Altima, and cultivating enough interest to attract buyers of Corolla, Civic, Elantra, Fit, Yaris, RAV4 and CR-V.

        What does GM have in its projected inventory that will do all that?

  • avatar

    “I read the link to the Windsor Star. This is how it works in Canada. Stephen Harper has a majority conservitive, federal government he can do what ever he wants. Jim Flaherty is Steves finance minister. Jim dosn’t break wind, unless Steve gives him the nod. Stephen Harper dosn’t pass gas without consulting with the USA. As I understand it, the good folks of America are having an election.”

    With all due respect Mikey, but that’s a complete crock!

    • 0 avatar

      Mikey is correct; this is common knowledge, for God’s sake!

    • 0 avatar

      @oboylepr….With all due respect,thats exatly “how it works”. How do you think we ended up owning GM shares?

      President Obama,called up Steve and said. “Steve,my man, we’re bailing out GM” “No preasure here Stevo ,but if you want play ya better pay”

      • 0 avatar

        Would not that have been George W who made that call?

      • 0 avatar

        @Golden 2…Dec 19 2008,was my last day at GM Oshawa. Around 9:00 AM that day President Bush wrote the first 25 million dollar check. President Obama took over in mid January and created the “task force”?

        GM went belly up June 2009.

      • 0 avatar

        My point is, we in Canada would like to believe that we make our own decisions. To a certain degree ,we do. Unless of course,the USA says no.

        Case in point. How about that pipeline from our oilsands to the refinery in Texas? The USA was luke warm to the whole idea. Steve H says “screw you USA, will sell it to the Chinese”

        The USA says ” Mr Harper,perhaps will take our money, and technology,and run away”. Mr Harper, like a chastised child, decided that the best course of action would be to shut the f– up.


      • 0 avatar

        It was sort of a silly threat to begin with. Kinda like bar-talk that doesn’t really make sense the next day.

  • avatar

    Really, a share buyback is a solid idea for just about any company in GM’s position. They’re in relatively good shape right now, all things considered, but their stock is undervalued due partially to the concentration of so many shares in a handful of government shareholders and the ever present threat of it getting dumped and diluting the market. A buyback plan would soothe investors’ fears and allow the remaining shares to appreciate (which, in turn, would allow GM to gradually issue some back onto the market at a good price and recoup some of the expense).

    Doubtful they’ll do anything until after the election, to avoid any misinterpretation.

  • avatar

    The first sentence is nonsensical. “Shares” aren’t having difficulty doing anything. There should be an “are” before the “held” and “, who” after the word “Ontario”. Sorry for being a grammar nazi, but I had to read that sentence several times.

  • avatar

    If GM is truly profitable, I think the better solution is to have them declare a small dividend. This allows more funds to buy them and adds share demand.

    Then raise the dividend every year to be identified as a dividend growth story. This adds additional share demand.

    Now the Canadian and US government can announce a plan to sell GM over a 20 year period. That takes pressure off the stock price. This at the same time while they get dividend income.

    Each year they can report X dollars of income plus X dollars sales and spin it in a positive manner.

    As the dividend grows, funds may come forward to offer to buy their remaining shares ahead of the 20 year plan.

  • avatar

    I concur with Mikey and no matter whether it was Mr Bush or Mr.Obama, someone called Ottawa and they in turn called Queen’s Park to bring the Ontario Government on side too, after all we do have workers in these two Companies in Canada, this was before FIAT of Italy took over Chrysler as a “gift” of sorts by the present USA Government, its amazing that this ever succeeded at all, life continues!

  • avatar

    As a Canadian Tax Payer, (and we pay a fair share of them) Investing our tax dollars into GM and Chyrsler was a big mistake, and something I will remeber every election day.

    How Goverment can ignore industries like Pulp and Paper, and buy into the Auto Industry.

    GM and Chyrsler should have been left alone, and Fiat and other companies could have swooped in and bought up what was left. Insted Fiat was basically handed Chyrsler without any funds changing hands, and is still building thier minivans in Ontario. With out or very little job loss.

    Yes a Strong CDN $$$$ hurts industries, but the strong will survive. and the weak will well surcum.

  • avatar

    Harper did what Red Tories always do: pander, spend, and fold.

    Then they drive on, leaving ordinary Canadians holding the bag.

  • avatar

    There is really nothing surprising in any of this. A large shareholder who wants to sell all or part of their holdings would often negotiate with the underlying company directly if that company has the cash to buy the shares and is willing to do so.

  • avatar

    Countries everywhere saw the logic of bailing out “their” auto industry. Does Canada really have to be different just for the sake of being different?

  • avatar

    Regardless of ‘who called who’ it would have been political suicide for PM Harper NOT to help out the auto sector. A large part of his support is in Ontario, which is Canada’s manufacturing center, and his refusal to help out one of his biggest bases would have ensured his quick fall into obscurity. Mr. Harper is not that stupid!
    As Canada’s biggest trading partner, the U.S. certainly has an influence on major policy decisions, but to suggest that Canada is in lockstep with American wishes, is both cynical and somewhat naive.

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