Shares of General Motors (NYSE:GM) were up about 3.6% last month, and have risen about 50% over the last year. Those gains have come despite heavy selling pressure: The U.S. government has been selling off millions of General Motors shares it received as repayment for the company's 2009 bailout.
General Motor's stock has risen because its business has been improving. With the government now saying that the last of its shares will probably be sold this month, GM's stock could rise more dramatically. But as Fool contributor John Rosevear explains in this video, GM's stock could hit a near-term pothole before that happens.
An abbreviated transcript of the video:
Hey Fools, it's John Rosevear. General Motors stock was up about 3.6% in November, much of that gain coming after the U.S. government said that it plans to sell off the last of its GM shares by the end of the year. That should be great news for GM shareholders, although there's a little bit of a catch. The U.S. Treasury Department has been selling GM stock on the open market since early this year, and will have sold off around 300 million shares once its selling is complete. All that selling has probably put some downward pressure on GM's stock, but it has still risen about 50% in the last year as GM's business has continued to show improvements. Once that selling is completed, it should have more room to rise. That will be good news for GM shareholders. But as I said, there's a catch that could cause some trouble for GM in the short term. These shares that the government has been selling are of course the last of the shares that the government received as partial payment for the $49.5 billion in loans that it gave to GM to get it through the economic crisis and through bankruptcy restructuring. GM has long since satisfied the terms of those loans, paying them back with a mix of cash and stock as per the original agreements. But the thing is, GM's share price hasn't been as high as everyone hoped when the government and GM agreed on the terms of the deal. It's looking like the government is going to come up about $10 billion short on the repayment of those loans once all those shares are sold. Now, the government is already saying that a $10 billion loss here is totally worth it, given that the bailouts for GM and Chrysler essentially saved the entire US auto business. And I'm sure that GM CEO Dan Akerson and his advisors already have a carefully thought-out strategy for talking about this when it arises. But there's likely to be an outcry from folks who think they can use this to score points at President Obama's expense, and that could create a bit of a firestorm for GM that will need careful handling. Of course, it could end up that the government announces the end of its selling in the week between Christmas and New Year's when nobody's paying attention, and maybe that will turn out to be the strategy here. But it's something that shareholders need to watch. Thanks for watching, and Fool on.
Fool contributor John Rosevear owns shares of General Motors. You can connect with him on Twitter at @jrosevear. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.