GM IPO raises $20.1 billion

NEW YORK Wed Nov 17, 2010 6:38pm EST

A message welcoming General Motors is seen on the Morgan Stanley stock ticker in New York, November 17, 2010. REUTERS/Shannon Stapleton

A message welcoming General Motors is seen on the Morgan Stanley stock ticker in New York, November 17, 2010.

Credit: Reuters/Shannon Stapleton

Related Topics

NEW YORK (Reuters) - General Motors Co GM.UL pulled off the biggest initial public offering in U.S. history on Wednesday, raising $20.1 billion after pricing shares at the top of the proposed range in response to huge investor demand.

GM sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

Including an option that would allow underwriters to sell more shares, expected to be exercised in coming days, GM looks set to raise $23.1 billion -- the biggest initial public offering ever.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy in June 2009 with sharply lower costs and higher profit potential.

The U.S. government's stake in GM will drop to about 33 percent from 61 percent if all available shares are sold.

The stock will begin trading on Thursday on the New York and Toronto stock exchanges.

The success of the IPO is good news for the Obama administration, which faced criticism for bailing out GM, and will help the automaker shed its "Government Motors" label.

Auto industry executives and analysts said the reversal in Wall Street sentiment toward GM pointed to renewed confidence in an industry that was hit hard by the credit crisis of 2008.

That is a positive sign for a range of auto-related companies, including Chrysler, that are looking to tap the credit and equity markets in coming months, analysts said.

"You're not in GM for a three-month investment," Tim Leuliette, a director at auto parts maker Visteon Corp, VSTO.OB said at the Reuters Autos Summit.

"You're into GM because a critical element, a critical building block of the U.S. economy, has significantly repositioned itself to be competitive.


The stock sale represents a big step toward taxpayers recouping the U.S. government's $50 billion rescue of the 102-year-old company, which had fallen from blue-chip status to bailout basket case in recent years.

GM earned $5 billion in the first nine months of 2010 and is on track for its first full-year profit since 2004. Earnings will accelerate if U.S. auto sales continue to creep back up toward the 15-million or 16-million vehicle-per-year sales rates the U.S. industry last saw in 2007, analysts say.

Sales plunged to 10.4 million vehicles in 2009 and have staged a slow recovery to near 11.5 million this year.

"GM is making a lot of money at depression levels of sales. As the market improves it should make even more money," said Dave Cole, chairman emeritus of the Center for Automotive Research.

In a road show for investors spearheaded by GM Chief Executive Dan Akerson and Chief Financial Officer Chris Liddell, the automaker has emphasized both its sharply lower costs and its exposure to key growth markets like China.

One of the open questions was whether GM's China partner, state-owned SAIC Motor Corp Ltd (600104.SS), was able to move beyond a last-minute regulatory hurdle that threatened its plans to take a 1 percent stake in GM.

The two companies had negotiated new cooperation in areas such as electric car programs in talks that began this summer.

Under a tentative deal, SAIC had agreed to invest $500 million to $1 billion in GM pending Chinese government approval, people with knowledge of those discussions said.

As of late on Wednesday, China's Ministry of Commerce had not approved the SAIC investment, said three people familiar with the matter.

Sources have said that sovereign wealth funds in the Middle East and Asia are among the investors.


The U.S. Treasury will remain GM's largest shareholder for now. U.S. officials have said unloading the entire stake is likely to take several years.

The stock price will need to rise by 47 percent to $48.58 -- about what it costs to fill the gasoline tank of a 2010 Chevy Malibu LS 4-door sedan -- for the U.S. government to break even on its follow-on stock sales.

At $48 per share, GM would have a market value of more than $90 billion. In comparison, its closest rival, Ford Motor Co (F.N), has a market capitalization of $59 billion after a rally that has sent its stock up 65 percent this year.

Government officials have argued that it would represent a kind of success if the White House breaks even only on the $30 billion that the Obama adminstration committed to GM. Just over $19 billion in funding came from the Bush administration.

The GM bailout spared the automaker from liquidation and saved hundreds of thousands of manufacturing jobs at the company and its suppliers, officials have said.

The governments of Canada and Ontario also took a combined stake of 11.67 percent stake in GM in return for helping to fund the bailout, and they reduced their stakes through the IPO.

With over-allotments, GM's IPO would eclipse the record $22.1 billion raised by Agricultural Bank of China (601288.SS) in its IPO in July.

(Reporting by Kevin Krolicki in Detroit and Clare Baldwin and Soyoung Kim in New York; additional reporting by James Kelleher in Detroit and John Crawley in Washington; Editing by John Wallace, Matthew Lewis and Ted Kerr)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (42)
RodeoTina wrote:
No thanks, I was a secured bondholder of GM and with one stroke of the pen Obama wiped $600,000 or 95% off of my retirement and gave over half of what I thought was secured money to the UAW. I’m 68 years old and my Wife and I owned a hardware store in Rapid City, SD for some 40 years. I can’t possibly make this money up and I have had to go back to work. I can’t even look at a GM product anymore and it seems most folks can’t either.

Nov 16, 2010 7:53pm EST  --  Report as abuse
xyz2055 wrote: you would have been better off if GM had been allowed to fail and close it’s doors? My sympathies sir on your loss, but anyone who invests 95% of the their retirement money into 1 investment vehicle is asking for problems. Assuming you didn’t work for GM since you said you’ve owned a Hardware Store for some 40 years. I also have to laugh at those that call GM “Obama Motors” and call this an example of socialism. You folks really need to get an education on what “socialism is”. In socialist countries they don’t “loan” businesses money, they take them over. GM is gradually paying back those loans. Once completed the government will have no standing in that company. Again, that’s not what would happen in a “socialist” country. Go visit Venezuela for a better example.

Nov 16, 2010 8:06pm EST  --  Report as abuse
Trooth wrote:

You were an evil “rich” person. Inflation is going to wipe out the retirement of those who are lucky enough to survive the socialization of many industries under our new comrades.

Nov 16, 2010 8:07pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.