General Motors Co. (NYSE: GM) announced this morning that it will purchase 200 million shares of its stock currently held by the U.S. Treasury for a total of $5.5 billion, or $27.50 a share. The purchase price represents a premium of 7.9% to last night’s closing price.

The sale by the Treasury Department marks the beginning of its plan to dispose of taxpayers’ holdings in GM, which will total about 300 million shares — about 19% of shares outstanding — after today’s sale.

GM will take a one-time charge of about $400 million in the fourth quarter as a result of the purchase. Following the purchase, GM’s shares outstanding will decrease by approximately 11%, and the company expects the transaction to be accretive to earnings per share.

The Treasury Department plans to dispose of its remaining shares over the next 12 to 15 months, and may begin selling its shares “into the market through various means and in an orderly fashion” as soon as next month.

U.S. taxpayers owned 26% of GM after the $49.5 billion bailout of the company in 2008 and 2009. At today’s selling price, U.S. taxpayers are taking a significant loss. For the total of 500 million or so shares the Treasury owned before today’s sale, a share price of about $53 would have been needed for taxpayers to break even on the deal.

Paul Ausick

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