Selling GM Stake Will Be Challenge for Canada

The Canadian government could have trouble divesting its $3.5 billion holdings in General Motors Co., Bloomberg News reports.

The news service says advisor Rothschild Ltd. tells Canada GEN Investment Corp., which oversees the 9% GM stake owned by Canada and Ontario, that investor demand for the shares may be weak because the company has forecast "flat performance." Bloomberg cites documents it obtained under Canada's freedom of information law.

Canada obtained an 11.7% stake in GM in July 2009 in exchange for part of its US$9.5 billion contribution to the company's bailout. Canada GEN sold 30 million shares in GM's initial public offering in November 2010 and still owns about 140 million shares.

Canada GEN is authorized to sell its entire holding, which could involve a public offering, a private sale or company buyback, according to Bloomberg. It says Canada is likely to sell its shares directly to GM by the end of next year unless the stock price falls below $20. GM shares closed at $24.80 on Friday.

The U.S. and a union-run retiree trust, which own stakes of 26.5% and 11.7%, respectively, also say they want to sell their GM stock Analysts say the likelihood that nearly half the company shares will be unloaded in the near future is hurting the stock price. GM shares closed at $24.80 on Friday, down from $33 in the IPO.