GM IPO could raise over $22 billion: source

A GM sign is seen outside the Medved General Motors car dealership in Arvada, Colorado August 12, 2010.

NEW YORK (Reuters) - General Motors Co GM.UL is boosting the size of its common stock offering by more than 30 percent, a source familiar with the matter said on Tuesday, potentially making its landmark IPO the largest U.S. offering ever.

The expanded IPO, responding to surging demand, could raise as much as $22.7 billion, including overallotments, the source said.

The increasing size of the IPO reflects renewed investor confidence in the world's No. 2 automaker less than a year and a half after dwindling cash and falling sales pushed it into a bankruptcy funded by the Obama administration.

GM now plans to sell 478 million common shares for $32 to $33 each, raising about $15.5 billion at the mid-point, the source said.

The $22.7 billion could be reached if the IPO prices at the high end of the new price range, including an overallotment provision for both common and preferred shares.

The decision comes after investors have put in $70 billion worth of orders for GM common shares, the source said, adding that the company plans to file an amended S-1 document with the U.S. Securities and Exchanges Commission.

GM earlier on Tuesday increased the size of its preferred stock offering by $1 billion to $4 billion in a move that will strengthen its balance sheet by paying down pension debt -- one of the concerns investors had cited heading into the IPO.

The largest U.S. IPO so far is Visa Inc's (V.N) $19.7 billion stock sale in 2008.

The final terms for GM's IPO are expected on Wednesday. The stock is set to begin trading on the New York and Toronto stock exchanges on Thursday.

Teetering on the brink of failure before the government intervention in 2009, the U.S. auto industry has come through the punishing downturn of the past two years with sharply lower costs and higher profit potential, analysts said.

CASH COW?

"I think part of it may be the market looking at a restructured General Motors and thinking this can be a cash cow again under certain market conditions," said Brad Coulter, a director at Michigan-based advisory firm O'Keefe & Associates.

"If you get back to an even moderate market of 13, 14, 15 million units, I think the market is expecting GM -- and you are seeing it with Ford as well -- to be making a lot of money."

U.S. auto sales are expected to rise to 11.5 million units this year from 10.4 million last year, and are widely seen recovering to the pre-recession level of more than 15 million units in the next few years.

If the GM IPO performs well, it could trigger a shift in public sentiment about the Obama administration's unpopular bailout of the U.S. auto industry in 2009, Coulter said.

GM, which lost $88 billion from 2005 through just before its 2009 bankruptcy, earned a $4.1 billion net profit in the first nine months of the year and is on track for its first full-year profit since 2004.

GM has said it can now break even at U.S. industry auto sales as low as 10.5 million vehicles. That means the restructured GM would have made money in 2008 when the old GM lost $31 billion.

The strong investor response to the GM IPO also means that the initial loss to U.S. taxpayers will be more limited.

Based on a diluted share count of 1.9 billion, $33 per share would give GM a market value of about $63 billion.

That approaches the roughly $66 billion value that GM needs in order for U.S. taxpayers to break even, based on the U.S. Treasury's remaining common stock holding and a share price projection by the Treasury's special inspector general.

Whether taxpayers are made whole will hinge on subsequent share sales by the U.S. government and how the newly listed GM shares perform.

(Additional reporting by David Bailey and Kevin Krolicki in Detroit and Maria Aspan; Editing by Maureen Bavdek, Matthew Lewis, Gary Hill)