Dogged by headlines about a government investigation into ignition defects and recall of 1.6 million vehicles, General Motors' stock could still hit $50 per share as soon as next year, hedge fund founder Kyle Bass told CNBC on Friday.
Bass, founder of Hayman Capital and owner of a big position in GM, said he believes the automaker's stock could trade in the high $40s or even touch $50 a share in 12 to 18 months, more than $15 higher than current prices.
Despite the ongoing probe into GM's handling of the ignition defect and the massive recall that followed, Bass told "Squawk on the Street" that GM is one of the cheapest stocks in the market.
He also said the government could find itself liable for claims related to faulty ignitions because it took over the company when GM filed for bankruptcy in 2009. His bullish stance on GM came as a vehicle safety group attributed 303 deaths to faulty air bags in GM vehicles.
"When I look at this, this was not a bankruptcy," Bass said. "It was a government takeover of GM. It may very well be that the government is liable for the claims that the government is looking into. A lot of these claims were discharged in bankruptcy and the government ran the company for a while. I find it kind of silly."
(Read more: Kyle Bass takes stake in 'undervalued' GM)
Bass grew to prominence after cashing in on a big bet against the subprime housing market before the mortgage bubble burst in 2007. Bass' stake in GM makes up nearly a quarter of his portfolio.
He also recently sold 5.6 million shares of JC Penney.