FILE – In this file photo taken Thursday, Nov. 18, 2010, General Motors headquarters are shown in Detroit. Shares of the reborn General Motors lost momentum in early trading Friday, Nov. 19, dropping more than 2 percent on their second day of trading as a new company. (AP Photo/Paul Sancya, file)
DETROIT (AP) — General Motors’ stock fell the second day it traded, although it stayed above its initial price Thursday of $33.
After a successful return to public markets the day before, GM’s stock dropped more than $1 to $33.11 in the first half-hour of trading Friday, as investors sold it to lock in profits. But it recovered and was trading around $34 in the afternoon.
Analysts said bankers who managed GM’s initial public offering probably stepped in to buy shares and keep the stock from dropping below $33. That would signal the stock was priced too high.
The second-day stock dip isn’t surprising, although a drop below the IPO price could spell trouble because it would trigger computerized “stop loss” orders to sell millions of shares, said Scott Sweet, senior managing partner of the research firm IPO Boutique. He expects volatility for three or four days before the shares stabilize.
Investors and the U.S. government are watching how the market views GM. The company’s stock went public amid an impressive turnaround 16 months after exiting a bankruptcy.
By midday on Friday, the stock briefly went above Thursday’s closing price of $34.19 before settling in around $34. Early in the afternoon, GM stock had changed hands about 91 million times, well behind Thursday’s pace.
The stock saw a successful debut the day before, at least by some measures. After being priced at $33 a share in the IPO, the stock opened at $35. It ended the day up 3.6 percent, after trading as high as $35.99 in the first few minutes of trading. Almost 457 million GM shares traded, about one tenth of all trading of New York Stock Exchange shares.
The government and GM’s other owners sold 478 million common shares in the IPO, bringing in a total of $15.8 billion. The government is on its way to getting back at least part of the $50 billion it spent bailing out GM last year.
The federal treasury made $11.8 billion in the IPO by selling 358 million shares, reducing its ownership stake about 36 percent from 61 percent. It stands to make $13.6 billion — and lower its stake to 33 percent — if bankers exercise options for 54 million more shares. If the options are taken, the government will have 500 million shares left, and they must sell for $53 each in order to get all the bailout money back.
The bankers have 30 days to exercise their options, and if they do, it would add 72 million shares to the number now on the market, bringing the total to 550 million.
Sweet doesn’t think uncertainty over the options is weighing on GM’s stock price because investors know that banks are likely to buy and resell the additional shares.