General Motors Co. has made an important move that may turn out to be quite helpful as U.S. Government considers different options for its own shares in the company.
The remaining stake in Ally Financial Inc., which is a former lending subsidiary company, is being sold by General Motors. Nowadays Ally Financial Inc. is one of the most famous American auto lenders. It works mostly with General Motors and Chrysler Group LLC, and is also owner of Ally Bank, which is one of the most successful online banks in the last few years.
The stake estimated at about 900 million dollars by the company is planned to be sold at a private placement. The sale comes with a perfect timing for the leading US automaker, because the Government has been discussing different options concerning unloading its majority stake in Ally. During the financial crisis, the former lending subsidiary firm received some money support estimated to 17.2 billion dollars by the U.S. in order to survive after its sub-prime mortgage losses, because it had some difficulties due to serious legal issues.
Thanks to the financial support provided by the US Government, Ally has managed to deal with the problems and even to pay back the remaining part of its bailout, amounted to about 4.9 billion dollars. Regardless of the issues it has gone through, the company remains one of the largest financial institutions.
In addition, both the Treasury of the U.S. And Ally announced that unloading the 64%-stake of the Government could be achieved by initial public offering. That is exactly why the sale of General Motors stake may provide the US Government with the opportunity to consider overall investor demand.
The financial crisis also influenced General Motors, which was a ward of the Government then. The Chief Executive of the company has managed to stabilize General Motors and release it of the Treasurys ownership. For more than a year now, the company has been trying to overhaul its relationship with Ally. The fact that this will also help General Motors to get rid of the Government oversight is not to be underestimated.
According to CNN Money, the current share price of General Motors Co is 1.49% up, and its one-year return rate is 34.27% up. The 15 analysts offering 12-month price forecasts have a median target of 48.00, with a high estimate of 56.00 and a low estimate of 39.00. The median estimate represents a +24.00% increase from the last price of 38.71.