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As Uncle Sam unloads GM, shares near all-time high

Monday, 2 Dec 2013 | 2:50 PM ET
General Motors headquarters in Detroit
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General Motors headquarters in Detroit

Three years after the U.S. Treasury took a sizable stake in General Motors when the automaker launched a post-bankruptcy IPO, shares of GM are on the cusp of hitting an all-time high.

The resurgence of GM shares, which languished for the first two years after the IPO, comes as the federal government is about to finish selling all of its GM holdings. For Uncle Sam, the exit is one it has orchestrated over the last year with a steady sale of GM stock.

GM executives have been waiting for this move, and privately pushing for it, over the last three years. After all, they expect the Treasury's stake is one factor keeping those shares from soaring.

GM shares never soared as predicted

I recently went back and looked at predictions for what would happen to shares of GM after the IPO in November 2010. The stock was priced at between $26 and $29, and it opened up at $33.

(Read more: Strong US sales power GM's Q3 earnings beat)

On that first day, as I was reporting on the floor of the NYSE waiting for the stock to start trading, I remember one trader confidently predicting the stock would be trading over $40 in the near future. He was wrong. It got as high as $39.48 intraday on Jan. 6, 2011.

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He wasn't alone.

In December 2010, Credit Suisse had a $43 price target for GM, RBC Capital was at $42 and there were more than a few people on Wall Street saying the new GM stock could tickle $50 within a year of its IPO.

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Looking back now, those predictions were based on the belief investors would be encouraged by GM cashing in on improving auto sales in the U.S. and its position as a sales leader in China, which had just become the world's largest auto market.

They also glossed over the warts of General Motors. Europe was mentioned by many as a problem the company was working quickly to fix. Three years later, GM is still losing money in Europe and sales there continue to be a drag on the company.

Will GM take off when free of the Treasury?

Now that the Treasury is about to sell the last of the 500 million GM shares it initially held, the question is whether the stock can soar from here.

Goldman Sachs has a price target of $45 for the stock. Deutsche Bank is at $46.

(Read more: Gasoline? Natgas? Our car lets you choose, GM says)

But when you read the analyst notes and take the pulse of Wall Street about General Motors stock, there's a more realistic tone to future expectations. The focus now is more about profit margins and whether the new GM has the product portfolio to compete in a more crowded and competitive auto market where sales are expected to remain strong.

Could GM shares hit $50 in the next year? Maybe, but given the incredible run stocks have had over the last year, there's a growing feeling the market is due for a pause, and, if so, GM shares could move into a holding pattern.

—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.

Questions? Comments? BehindTheWheel@cnbc.com.

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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