Buyback of the 200 Million Shares of Stock Issued by G.M. During the Auto Bailout

To: Treasury Secretary

From: Kunal Agarwal

Date: October 31, 2013

Re: Buyback of the 200 million shares of stock issued by G.M. during the auto bailout

After reading Jeff Bennett and Sharon Terlep’s recent article, “U.S. Balks at GM Plan,” in the September 17, 2012 issue of the Wall Street Journal, I am making a recommendation to maintain a hold position on the G.M stocks.

A treasury spokesperson stated that, “the government has no plans to be a long-term stockholder in GM but also wants to "maximize taxpayer returns”. The authors further stated that, “A sale now would leave the government with a hefty loss on its investment.” Independent research shows that the financial condition of G.M. is improving and the stock prices are expected to rise in the future. As such, it would be a good strategy to sell the stocks in small tranches over the next one year to achieve an average stock price of $30 per share.

The conclusion can be justified by the following reasons:

• The money belongs to the tax payers and hence the government must make profits on the stocks as the taxpayers would expect them to do so

• The bailout was a blessing for G.M and without the bailout, G.M would probably have to file for bankruptcy

• The condition of G.M is yet improving and pay restrictions and curbs on corporate jet use by the Government are justified.

• G.M reported a net income of $1.85 billion in the second quarter and this is the company's 10th straight quarterly profit.

With a forecast for sustained growth and a justification that the Government should profit from its investments, I recommend that we maintain a hold position on the G.M. stocks. If you would like to discuss this in greater detail, please contact me at kunalalok.agarwal@simon.rochester.edu.