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IPO View: GM considered, rejected HK listing: sources

NEW YORK/HONG KONG (Reuters) - General Motors Co GM.UL considered an Asian exchange for its historic return to the public markets, but ruled it out because it would have delayed the IPO, people familiar with the matter said.

GM, which filed plans for a dual listing in New York and Toronto this week, as recently as several weeks ago was also considering listing in Hong Kong to highlight its growing focus on China -- now the world’s largest car market -- and to attract the region’s growing pool of investors, the sources said.

That plan was ultimately scrapped because a Hong Kong listing would have pushed GM’s IPO beyond its targeted debut between late October and the U.S. Thanksgiving holiday, sources said, asking not to be named because the preparations for the IPO are not public.

It was also unclear what the U.S. automaker would gain in terms of investors or trading liquidity and listing on multiple exchanges would have added cost and complexity to GM’s already complicated IPO, two of the sources said.

“I don’t think signaling goodwill toward Asia is likely to be a significant enough argument for all the cost and complexity. I don’t want to overstate the cost and complexity but it’s not insignificant,” one of the sources said.

The Hong Kong stock exchange requires three years of profitability or a large market capitalization and revenue in order to list.

GM, which lost $88 billion from 2005 through the first quarter of 2009, is a former blue-chip stock, but it only emerged from bankruptcy in July 2009. It has posted profits for the past two quarters.

GM, now majority owned by the U.S. Treasury as a result of its taxpayer-funded bailout, is keen to distance itself from government ownership and the label “Government Motors,” and to build momentum in its turnaround.

The Obama administration, facing the mid-term elections in November, also wants to be able to cast its GM bailout as a financial success in the face of public skepticism and Republican political opposition, and a struggling economy.

“It would have taken too long to clear all the regulatory issues in Hong Kong,” one of the sources said.

GM’s Toronto listing is a direct result of the role Canada played in helping bail out the U.S. automaker, the sources said, adding that Toronto would not make a big difference as far as trading liquidity was concerned.

Canada and Ontario pitched in $9.5 billion alongside the United States’ $50 billion in GM’s government-sponsored bailout. GM emerged from bankruptcy protection 61 percent owned by the U.S. government and 11.7 percent by the Canadian and Ontario governments.

“It’s a big thank you to the Canadian government for their role in supporting GM,” one source said.

GM spokeswoman Renee Rashid-Merem declined to comment.

STRATEGY VS. POLITICS

While the decision not to list shares in Hong Kong may have no impact on who can or cannot invest in the company, it could make it harder to woo some Asian investors, one person familiar with the situation said.

GM is looking to leverage its IPO to further establish its presence in Asia and is considering using “cornerstone” investors -- investors who commit to buy and hold major stakes in an IPO, and who help attract more investors to large deals by showing they support it -- primarily in Asia, several people have told Reuters.

GM’s sales in China, now the world’s biggest auto market, surged 48.5 percent in the first half to 1.21 million vehicles, exceeding the company’s U.S. sales for the first time.

Over the same period, GM’s U.S. sales rose 13 percent to 1.08 million vehicles, while sales in Canada dropped 8 percent to 123,488 vehicles.

Underscoring China’s growing clout in the global auto industry, industry-wide auto sales in China totaled 13.6 million vehicles in 2009, far ahead of U.S. industry sales at 10.4 million vehicles and Canadian auto sales at 1.5 million vehicles.

“We view the Chinese market, the fastest-growing global market by volume of vehicles sold, as important to our global growth strategy,” GM said in a filing with the U.S. Securities and Exchange Commission on Wednesday.

In rankings based on domestic equity market capitalization, Toronto is last among the three exchanges that GM considered.

The New York Stock Exchange, run by NYSE Euronext NYX.N, is the top-ranked exchange globally, according to the World Federation of Exchanges. At the end of June, the NYSE had U.S. listings whose equity market capitalization on a domestic basis totaled $11.8 trillion.

The Hong Kong stock exchange, run by Hong Kong Exchanges and Clearing Ltd 0388.HK, was ranked fifth with $2.2 trillion and the Toronto Stock Exchange, run by TMX Group Inc X.TO, was eighth with $1.64 trillion.

“There’s no logic behind listing in Toronto other than the political factors -- none,” one source said.

Reporting by Clare Baldwin and Soyoung Kim in New York and Kennix Chim in Hong Kong; additional reporting by Philipp Halstrick in Frankfurt, Jonathan Spicer in New York, Alison Leung in Hong Kong, Fang Yan in Beijing, Jennifer Kwan in Toronto and John Crawley in Washington; editing by Andre Grenon

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