The government is about to sell a big stake in Ally Financial, the auto loan giant formerly known as GMAC, through an initial public offering. It's a victory for taxpayers who had to bail the company out at the height of the financial crisis.
But what about investors? Should you buy shares of Ally when it starts trading on the NYSE later this week under the ticker symbol ALLY (ALLY)?
That's good for Treasury. But the auto lender's stock looks risky.
Ally received $17.2 billion in bailout funds from the government's controversial Troubled Asset Relief Program (TARP).
Don't get me wrong, it's good news that the Treasury Department is unloading part of its Ally investment. Based on the $26.50 midpoint of Ally's projected price range of $25 to $28 a share, the government -- and by extension, taxpayers like you and me -- would raise just over $2.5 billion from the sale.
And that number is likely to go higher since the government may also sell another 14.5 million shares to the underwriters of the deal -- a long list that includes other former TARP beneficiaries such as Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC) and JPMorgan Chase (JPM).
So it's possible that the Treasury will finally eke out a profit from Ally. That's because Ally has already paid back $15.3 billion to the government.
[Read Full Article: Ally Financial says 'Thank you, taxpayers']