GM to price shares at $26-$29
Washington — General Motors Co. plans to sell up to $10.6 billion in
stock in its initial public offering, a move that would leave the U.S.
government with less than a majority stake in the automaker, two people
briefed on the matter said Monday.
GM plans to offer 365 million shares at $26 to $29, for a range of $9.5
billion to $10.6 billion. That would make the IPO one of the five
largest in U.S. history.
The company will set the final price after gauging market demand during
a two-week road show that will begin on Wednesday, the sources said.
GM is expected to outline the details of the offering as early as today
in a filing with the Securities and Exchange Commission, the sources said.
Rebecca Lindland, an analyst with IHS Automotive in Lexington, Mass.,
called reducing the government's stake to a minority interest
"This is an important first step at getting the taxpayers paid back,
getting the government involvement to a minimum and showing that GM is
on the right track. This is a company that everyone had written off a
very short time ago."
The IPO is expected to get a final price on Nov. 17, with the stock
expected to start trading on the New York Stock Exchange and the Toronto
Stock Exchange the following day.
The Treasury Department, which swapped $40 billion in loans to GM for 61
percent majority ownership, plans to sell about $7 billion in common
shares, reducing its stake to 43 percent, the sources said. The precise
size of the government's stake won't be known until the IPO is completed
but it could fall below 40 percent if other GM owners exercise their
rights to acquire additional shares.
The Canadian and Ontario governments, which loaned GM $12 billion
combined, plan to sell about $1 billion of their 11.7 percent stake,
which will shrink to under 10 percent.
The United Auto Workers health care trust fund will sell about $2
billion of its stake, which will likely fall from 17.5 percent to 15
GM also plans to file to sell up to $3 billion in preferred stock, a
move that will generate cash the automaker can use to pay off debt and
shore up its underfunded pension. The preferred shares would convert to
The IPO, when it launches, will mark GM's return to the public markets
17 months after it exited bankruptcy as a new company under government
ownership. It also gives the public, along with GM retirees, dealers and
employees, a chance to invest in the automaker once again.
IPO market rebounding
The public offering comes despite a struggling economy and a weak year
for IPOs, though the IPO market has improved.
Since filing for the IPO in August, GM replaced its CEO with one of its
board members, Dan Akerson, who has been working to sell the offering to
investors. The company has been courting investors around the world to
The government will lose money on its first sale, although it is not
precisely clear how much.
Generally, stocks that go public are priced at a discount to woo
investors and often appreciate by as much as 10 to 30 percent in early
Determining the government's overall anticipated losses won't be
possible until the stock starts trading.
Steven Rattner, the former Obama administration auto czar, said Monday
the Treasury is looking at an overall recovery in the "low $40 billion
range" of its $49.5 billion bailout of GM.
GM spokeswoman Noreen Pratscher declined to comment, as did the Treasury
The Treasury Department holds 304 million of GM's 500 million common
shares, but GM plans to split the shares, which ultimately will put
significantly more shares into circulation.
The Treasury spurned efforts by GM's underwriters to sell a larger stake
in its IPO and hopes to sell the rest of its stock at higher prices in a
series of sales. The government may not be able to sell more stock for
at least six months.
By the end of the year, GM will have repaid the Treasury $9.5 billion,
leaving $40 billion outstanding on its bailout. That means it needs to
get about $131 a share for its stock to break even — before splits — on
The sale is half as large as once predicted; some analysts had suggested
GM's IPO could top Visa's, the largest ever at $19.7 billion U.S. But GM
has already won support from four or five sovereign wealth funds, which
are expected to announce they will buy up to $2 billion of the offering.
GM has taken other steps to improve its balance sheet, including paying
its remaining $2.8 billion obligation to the UAW's health care trust
fund seven years early, a move that will save the automaker $1.4
billion. The automaker also finalized a $5 billion line of credit.
Last week, GM said it would make at least $6 billion in cash and stock
payments to its underfunded pension plans and pay the government $2.14
billion for preferred shares by December.
During bankruptcy, GM shed billions in debt, killed four of its eight
brands, cut 25 percent of its dealer network and closed a dozen auto plants.
Now, the company, which lost $88 billion over a four-year-period, has
earned $2.2 billion in the first half of the year and is poised to
announce "significant" profits for the third quarter.
Impact on GM board
Maryann Keller, a Stamford, Conn.-based auto industry consultant, said
reducing the government's ownership stake below 50 percent could
influence the composition of GM's board.
There could be an expansion of the board or a change in members, if
majority ownership is truly in the hands of independent shareholders,
said Keller, of Maryann Keller & Associates.
The Treasury appointed a majority of GM's current board. CEO Akerson and
former CEO Ed Whitacre Jr., who remains chairman, are also
One party that won't be selling shares is the former GM's bondholders,
who hold 10 percent of the new GM and warrants for another 15 percent.
That won't be resolved until old GM's reorganization plan is confirmed.
Scott Sweet, a senior managing partner of IPO Boutique in Tampa, noted
GM still faces financial challenges — including its pensions,
underfunded by $27 billion worldwide, and troubles in the European market.
The credit belongs to the man who is actually in the arena; whose face
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