initial public offerings (IPOs) trading on American exchanges

Wednesday, November 17, 2010

GM IPO boost good news for U.S. taxpayers

General Motors expanded its initial public offering Wednesday by 31 percent, bringing taxpayers and the Treasury Department closer to recouping their huge investment in the revitalized American automaker.

GM announced earlier it would raise the offering price to $32 to $33 per share, up from a previously announced range of $26 to $29 per share.

GM said in a statement it would increase the planned offering of common stock to 478 million shares from the previously expected 365 million shares, a sign of stronger-than-expected demand for a stake in the automaker that is just 16 months out of bankruptcy protection.

The move, coupled with an expected stock price of up to $33 per share, would bring the U.S. government closer to getting back the $50 billion it spent bailing out GM last year. It could also make GM's IPO the largest in history for a U.S.-based company.

GM plans to finalize the IPO share price on Wednesday. The share price is targeted at $32 to $33 per share.

The revised terms of the IPO could raise as much as $22.7 billion and take U.S. government ownership of the automaker down to as little as 33 percent from 61 percent.

The moves came after GM received orders worth about $70 billion for the common stock portion of the offering as of late Tuesday, a source familiar with the situation said.

The strong demand is good news for U.S. taxpayers and the Treasury, which is likely to take in more than $10 billion from the IPO proceeds while retaining a significant equity stake in the company. The Obama administration has said it would need to ultimately get $36 billion to break even, including $6 billion in pre-bankruptcy help given to GM and $30.1 billion in Chapter 11 exit financing.

Others have said the total taxpayer help extended to GM is worth closer to $50 billion.

If GM's stock price rises in the months and years after the offering, taxpayers will come closer to the break-even point. GM shares are expected to begin trading on the New York and Toronto stock exchanges Thursday.

The strong Wall Street reception for GM represents a win for the Obama administration after it chose to restructure GM in an unpopular, 2009 taxpayer-funded bankruptcy that left the automaker with the stigma that it had become "Government Motors."

No comments:

Post a Comment