With GM IPO, Speed Matters More Than Price for Treasury
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As it sells GM shares in the company’s IPO this week, the United States Treasury isn’t acting like a hedge fund—and it doesn’t want to.
For Treasury, according to senior officials I’ve talked to, the key priority in the IPO isn’t the share price—although that’s important—it’s the speed with which the government can sell its shares.
Inside Treasury headquarters on Pennsylvania Avenue, getting rid of the moniker “Government Motors” is more important than wringing every last nickel out of the sale.
“This company should never have been owned by the taxpayers,” said a senior administration official. “This is a strange period in American history where the government is acting like a sovereign wealth fund. But we’re not Warren Buffet here.”
The official said Treasury has learned from its experience in selling Citigroup back to the public. “Speed matters more than price,” the official said. “Once we announced we were selling Citi, officials told us it really changed the impression of them in the market.”
And although Treasury is going to sell shares into public markets in which foreign sovereign wealth funds can snap them up, officials aren’t worried about a public perception that the US government is simply selling GM shares to foreign governments. That’s because they don’t expect each foreign government will buy more than two percent of General Motors stock once it becomes available.
That’s a reasonable expectation—many of the foreign funds have skilled political operatives on the payroll in Washington, who are sure to tell their clients to steer clear of buying so much GM stock that they end up making headlines.
One thing Geithner’s team does expect is bad press. Treasury officials are bracing for news stories on the day of the IPO calculating just how far short the share price comes of the breakeven price for taxpayers.
“When it first comes out, people will run the numbers and say, ‘oh, the government will lose X,’” the official said. “But we think that the news that the government is getting out of GM is good.”
