General Motors S&P 500 inclusion marks next step in recovery

General Motors Co., four years after being kicked out of the Standard & Poor’s 500 Index, will heal another wound of the financial crisis when it rejoins the benchmark gauge for American equities this week.

The largest U.S. automaker is replacing H.J. Heinz Co., which will be purchased by Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital in a $23 billion buyout, according to a statement yesterday by S&P Dow Jones Indices LLC. GM, which had been in the S&P 500 since the index was established in 1957 until its 2009 bankruptcy, will be added to the gauge on June 6 and would be the 79th biggest company based on yesterday’s closing market values.

“They’re in essence getting a vote of confidence from S&P,” Daniel Genter, who oversees about $4 billion as president of Los Angeles-based RNC Genter Capital Management, said in a phone interview. “S&P expects that GM is going to have significant longevity and growth, for which reason it should be added back into the business mix of America.”

GM’s return to the S&P 500 is a milestone for the company since emerging from a 2009 reorganization and $49.5 billion U.S. government bailout that became a centerpiece of President Barack Obama’s first term. Optimism about GM is growing as the U.S. Treasury sells down its stake and the stock topped the $33 a share initial public offering price on May 17 for the first time in two years.

Shares Rally

Shares of the Detroit-based company advanced 1.9% to $35.08 as of 10:33 a.m. in New York. GM is up 22% in 2013, compared with a 15% advance for the S&P 500.

GM returned to the stock market in November 2010 with an initial public offering that raised $15.8 billion, before expanding to $18.1 billion when underwriters exercised the over-allotment option. The revisions in the S&P 500 may prompt money managers to shift holdings to match the index. About $5.58 trillion is benchmarked to the gauge, according to S&P’s website.

The Treasury said in December that it plans to sell its entire GM holding within 15 months after the automaker bought $5.5 billion of its stock, or 200 million shares, from the government. As of April 1, the Treasury held 241.6 million GM shares, representing a 16.4% stake, according to GM’s proxy statement.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome