A source told Reuters that Hayman Capital has bought a stake in General Motors Co. The hedge fund expects the stock price of the car manufacturer to increase to over 40% in the next 12 to 18 months after the US Treasury sells its stake in the firm.
Two people connected to another hedge fund said Hayman Capital's acquisition of GM stake came as the US government continues to divest its remaining holding in the automaker and as other investors also mull a purchase of the stock.
Hayman got its popularity when it made a bet against the overheated subprime market before the economic crisis. The report also cited a presentation made on HVST.com, an investing website, where Hayman Founder Kyle Bass said GM was one of the best investments available these days.
Bass was quoted in the presentation as saying, "GM equity represents one of the most compelling risk/reward situations of any large cap in the world today. Detroit is back. And GM could lead the way forward on the equity front."
The US Treasury has said that it will divest its remaining 2% stake in GM by the end of the year. According to the report, investors are expecting the carmaker to commence a common stock dividend and increase stock repurchases after the Treasury exit will be completed. The taxpayer bailout and bankruptcy reorganization that was given to GM in 2008 and 2009 led the US government to own a 60.8% holding in the carmaker. In the last few years, the government has sold off its stake in the carmaker.
Bass has said in his presentation that the exit of the Treasury in GM would take away the pressure on selling the stock and will lead to a meaningful dividend or repurchase program to occur within 45 days.
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