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GM Stock Offering to Cut U.S. Stake, Raise New Capital, Sources Say

June 28, 2010
2 min to read


DETROIT - General Motors Co.'s planned public stock sale is likely to leave the U.S. government with a minority stake while also raising new funds for the automaker, people briefed on the still-developing plans told Reuters.


The U.S. Treasury, which owns 60.8 percent of GM stock as a result of its $50 billion bailout last year, aims to sell about 20 percent of its holdings as part of the stock sale, two sources with knowledge of the preparations said.

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That would leave the U.S. government with a 49 percent stake before accounting for the further dilution from new GM share issuance.


The emerging terms of GM's planned IPO are expected to dominate interest among potential investors and analysts who will gather in Detroit on Tuesday to hear the first financial presentation by the automaker's new executive team headed by CEO Ed Whitacre.


GM is considering issuing new capital in the stock offering, chipping away at the one liability on its balance sheet that the government-funded restructuring failed to address: a $27 billion shortfall in its pension funding, the sources said.


The retiree health-care trust, affiliated with the UAW but administered independently, also plans to sell part of its 17.5 percent stake in GM to raise cash and diversify its portfolio, the sources said. The health-care trust is the No. 2 GM shareholder after the U.S. Treasury.


The sources asked not to be named because they were not authorized to discuss the confidential negotiations and no final decisions have been made.

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The sources could not detail plans for the two smaller GM shareholders. The governments of Canada and Ontario own 11.7 percent of GM, while bondholders in the Old GM, now known as Motors Liquidation Co., have 10 percent.

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