Governments generally don't make good business owners. But the U.S. Treasury, it turns out, is not too bad at selling out of them. Take how it exited its gargantuan and widely telegraphed 7.7 billion-share holding in Citigroup over the past eight months. All in, taxpayers reaped a 26 percent profit. It should foster hope that the Uncle Sam will dispose of its AIG and remaining General Motors stakes well, too.
After all, it must have been tempting at times for President Barack Obama's administration to push for a rush job on the sale — not least in the hope of scoring some political points by recouping bailout cash ahead of last month's election. As it was, though, both the politicians and the career mandarins at Treasury largely left it up to Morgan Stanley, which it hired to manage the process, to carefully dribble two-thirds of the stock into the market since April.
The burst of speed to offload the remaining 2.4 billion shares this week seems to have come at just the right moment, after a week-long rally in bank stocks in general and an 8 percent jump in Citi's shares in particular.
Morgan Stanley's successful role has won it some all-important bragging rights. Perhaps its bankers had some luck. But placing all $10 billion of shares overnight despite not sounding out any major investors ahead of time is no mean feat — and strongly suggests the Wall Street firm's advice was well grounded. And its execution looks flawless.
The firm has GM's IPO under its belt, too, for which it acted as lead bookrunner. Sure, the government made a loss on the sale — though the implied $10 billion paper loss on rescuing the automaker is less than the profit made on Citi. But that was not Morgan Stanley's call. Its bankers ran the process well enough to bump the initial share sale price up by 27 percent.
The Treasury might even decide, on the back of its recent partnerships, to keep Morgan Stanley on board to sell AIG and the rest of its GM shares. Doubtless the Wall Street firm would accept — though it might prefer some rather more remunerative work on top.
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