GM Launches Largest Stock Offering in History

Nov. 18, 2010
U.S. taxpayers will see $11.7 billion from IPO

General Motors set a price of $33 per share in a stock sale set to garner $20.1 billion and to erect a firewall between bankruptcy and one and a half years of government control. President Barack Obama lauded the initial public offering as "a major milestone in the turnaround of not just an iconic company but the entire American auto industry."

In June 2009, the debt-laden company had been forced into government-backed bankruptcy as it borrowed close to $50 billion from taxpayers to stay alive.

The sale will see the government reduce its stake in the company by nearly half to 37% making the US taxpayer at least $11.7 billion in the process.

It could drop further to 33% if additional shares are sold as part of the deal.

Obama, fresh from an election "shellacking" fueled in part by anger at big company bailouts, pointed to GM's resurgence as evidence his policies had worked.

"Supporting the American auto industry required tough decisions and shared sacrifices, but it helped save jobs, rescue an industry at the heart of America's manufacturing sector, and make it more competitive for the future," he said.

Although the final value of the sale may not be known for weeks, strong-demand clauses could send it beyond the current IPO record of $22.1 billion set by the Agricultural Bank of China in July.

The sale is already well on target to beat the $19.7 billion listing of Visa in 2008 which is the current U.S. record.

"All of us at GM are excited about this historic milestone," said GM chief financial officer Chris Liddell. "We are especially appreciative of those who stood by us through the toughest times."

Robert Schultz, an analyst with Standard & Poor's, said a successful IPO will encourage consumers who were "hesitant to engage with GM because of the bailout and public ownership."

"The purpose of the IPO is to begin to shift ownership of GM to the public from the three main shareholders: the US Treasury, the United Auto Workers union, and the Canadian government," he added in a client note.

Ahead of the sale, the Canadian and Ontario governments had a 11.7% holding, and the United Auto Workers union's retiree health care trust fund owns a 19.93% stake.

The return of GM to the New York Stock Exchange after a near 18-month hiatus could also make it easier for the company to raise capital as it continues to address pension underfunding and shifts away from gas-guzzling sport utility vehicles (SUVs) toward greener, electric and fuel-efficient vehicles.

Chief executive Dan Akerson will celebrate the firm's return to Wall Street by ringing the opening bell at the NYSE, and by reclaiming the "GM" stock ticker that once was a component of the Dow Jones Industrial Average, a list of the top 30 US firms.

Copyright Agence France-Presse, 2010

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