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GM Said to Seek $10.6 Billion in IPO to Help Repay Treasury

November 2, 2010
3 min to read


General Motors Co. aims to raise as much as $10.6 billion in an initial public offering that will reduce the U.S. and Canadian governments’ stakes in the largest U.S. carmaker, two people familiar with the plan told Bloomberg.


GM, 61 percent owned by the U.S. Treasury Department, will offer 365 million shares at $26 to $29 each, according to the people, who asked not to be identified because the plans are private. The automaker also will offer $2 billion to $3 billion of preferred shares that later will become common stock, said the people.

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CEO Dan Akerson is working toward returning the $50 billion GM received in a taxpayer bailout last year. The Treasury, seeking to win higher prices in future offerings, is selling less than the $12 billion to $16 billion that people familiar with the situation said Detroit-based GM and its investment banks had considered earlier.


“This makes sense,” George Magliano, a senior economist for IHS Automotive who is based in New York, said in an interview yesterday. “They need to protect the price of the offering. The IPO was never intended to buy out all of the government and union stakes in one fell swoop. It’s got to be done over time, and you need to get the right price.”


An amended registration statement that contains the number of shares and the price range for the offering will be filed with the Securities and Exchange Commission as soon as today, an election day in the U.S., one of the people said.


For the United States to break even, it needs to sell at an average price, before splits, of $131 a share, a person familiar with the matter told Bloomberg in September.


With a 3-for-1 split, the stock would need to rise to almost $43.67 a share -- almost 60 percent more than the midpoint of the planned offering -- to reach the breakeven point, said a person familiar with the planning.

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The suggested offering price would value GM at three times Ebitda, or earnings before interest, taxes, depreciation and amortization, while Ford Motor Co. trades at five times that measure, said the person. The discount should ensure the offering is over-subscribed and may lead to a jump in the price when trading begins Nov. 18, the person said.


Bonds issued by GM’s bankrupt predecessor dropped. The 8.375 percent bonds due July 2033, which were issued by old General Motors Corp. and convert to shares in the new GM, fell 3.5 cents to 33.5 cents on the dollar at 9:43 a.m. in New York, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.


GM’s offering range values the company at about $50 billion to $60 billion, Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC, wrote today in a note.


The U.S. Treasury will likely sell about $7 billion of stock, one of the people said. About $2 billion of shares will be sold by the United Auto Workers retiree health-care trust, and less than $1 billion may be sold by Canada, one of the people said.


The medical trust’s sale would be worth about 25 percent of its stake, while Canada will sell about 20 percent of its shares, one of the people said.

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The offering may price on Nov. 17 and the shares would begin trading the following day, the person said. A roadshow in which GM will pitch investors in North America and Europe will begin tomorrow or Nov. 4, the person said.


Noreen Pratscher, a spokeswoman for GM, didn’t respond to a telephone message seeking comment.


“It’s all up to the company” when it files with the SEC and begins its roadshow, said Steven Adamske, a spokesman for the Treasury department.

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