GM's stock sale just gets bigger

The size of the automaker's offering is expanded to 478 million shares. It could be larger and may be the biggest US IPO ever.

By Charley Blaine Nov 16, 2010 7:47PM
General Motors logo © Scott Olson/Getty ImagesA whole lot of investors want a piece of General Motors, and the automaker's initial public offering could be the largest U.S. IPO ever.

GM is expanding its IPO by almost a third as the Treasury Department and the United Auto Workers retiree health care trust sell more stock, news reports said.

GM hopes to raise as much as $15.8 billion by increasing the number of shares by 31% to 478 million. The offering could be even larger because an additional 72 million shares -- called a greenshoe -- may also be made available if there's enough demand.

If GM realizes $33 for 478 million shares, that's $15.8 billion. If it sells the greenshoe portion as well, the total hits $18.2 billion. Add in a $4 billion issue of preferred stock, and GM will have raised $22.2 billion, which would be larger than the $19.7 billion that Visa (V) raised in a March 2008 IPO.

Demand doesn't seem to be an issue. The 365 million shares originally set to be sold were oversubscribed by 10 times -- even after the projected price for the issue was raised to $32 to $33 a share. The original projection was for $26 to $29 a share.

What's not known is whether the expanded offering means a sizable number of shares will be sold to individual investors. There has been criticism that most of the efforts in selling the stocks has concentrated on large institutional investors, including pension funds and hedge funds.

 

A big question once the shares are sold and trading starts is how long the early investors hold on to their shares. Look for significant volume if the price holds even as hedge funds, in particular, sell their stakes.

GM boosted the size of its preferred-stock offering from $3 billion to $4 billion.

If nothing else, the offering will succeed in one of GM's main goals: reducing the stake held by the Treasury Department to about 26%, down from nearly 61%.

Cutting the Treasury's holdings was seen as a crucial move to help GM shed its unwanted moniker "Government Motors," a label the company claimed was hurting car sales.

The progress at GM, which has earned $4.2 billion in profit through the first nine months of this year, and at Chrysler means that the government can expect to recover more of the $82 billion it invested in the auto industry.

Orders for shares closed today, and the price is scheduled to be set after Wednesday's market close, with trading to start Thursday morning.

The IPO will help CEO Dan Akerson return some of the $49.5 billion GM received in a taxpayer bailout last year. The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb at least 50%, Bloomberg data show.

The IPO comes 16 months after GM emerged from bankruptcy. 

GM reported third-quarter net income of $2.16 billion last week, bringing its earnings this year to $4.77 billion.

Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup are leading the IPO that includes 35 underwriters, according to a GM filing with the Securities and Exchange Commission. Barclays, Credit Suisse Group, Deutsche Bank, Goldman Sachs and Royal Bank of Canada are also listed in the prospectus.

GM's common shares will be listed on the New York Stock Exchange under the ticker GM and on the Toronto Stock Exchange under the ticker GMM.

2Comments
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If wall street believes in GM, then I think I will sell all my stock holdings, and get out of the effort to support our country.  Been hit hard to many times, to be a average American, trying to help keep our country running.  But the rich and greedy, remain just that.
Nov 17, 2010 8:08AM
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I don't understand...everyone loses when GM's stock initially  tanked and now they get to start over with a clean slate? If I was king of the world, they would have to either fix their old debt or would have been allowed to fail completely. No more living on the edge for big companies with the bet on a government bailout. Do it right or disappear would be my mantra.
I know, I know...they are an important part of a strategic industry. Make them sock away some of their profits, spin off smaller companies, buy insurance, do something different. But no more too big to fail. That is like saying they are too big to make a mistake and they can do stupid stuff with impunity...look at their car line-up for the last 30 years.
Ah, talking about stupid and too big to fail...anyone check out how efficient our government is lately?
Oh, and I laugh when I break that government category down to the state level. What a joke! Best gov't I have ever seen is at the municipal level, where there is almost everyday accountability. Well, therein lies some hope.
And maybe the freshman Congressmen/women will have some time in the new year to look under the rug, behind the curtain and in the closet.
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