By on July 14, 2010


Bloomberg reports that GM has already pulled off one of the ballsiest IPO moves ever, by asking banks bidding to underwrite its IPO to use fees to subsidize the purchase of GM vehicles by its employees. According to the report, a GM document sent to bidding banks solicited

ideas as to how we can use the IPO to reposition GM and its vehicles within the investment community including your firm’s willingness to reinvest any portion of any underwriting fees into the purchase of GM vehicles for your employees and/or company use.


Winning bidders JP Morgan Chase and Morgan Stanley refuse to comment on whether or not they agreed to this condition, but considering their fees of .75 percent is a quarter of what they would normally charge, the fact that GM even asked shows a lot of chutzpah. Says Joe Phillippi of Autotrends

That’s hardball. After beating them down on fees they want another pound of flesh. It does sound a little unusual.

The details of GM’s IPO should surface next month, when GM files its prospectus ahead of a planned November IPO. If The General snagged a fleet deal from its underwriters, the Treasury would have to approve the deal… and it has already reportedly nixed an arrangement that would have paid GM’s IPO underwriters in company equity. But then, the two underwriting firms have already committed a billion dollars in credit to The General, an amount that is likely to far exceed their fees for the IPO. In short, government-rescued banks seem more than happy to bend over backwards for the government-owned automaker. Is anyone surprised GM thought it might get a few extra sales out of the deal too?

Get the latest TTAC e-Newsletter!

30 Comments on “GM Asks IPO Underwriters To Buy Its Cars...”


  • avatar
    ott

    That’s not hardball. That’s just balls.

    • 0 avatar
      educatordan

      Yeah if I overhead a conversation like what this article is detailing, I’d just walk away mumbling; “Would you believe the stones on that guy?”

  • avatar
    Da Coyote

    Guess they still can’t rely on quality, eh?

    Make mine Honda/Toyota/etc.

  • avatar

    almost makes you feel sorry for the banksters.

  • avatar
    ChesterChi

    It would have been even better if the bankers got paid entirely in Cobalts. Lots and lots of Cobalts.

  • avatar
    SherbornSean

    Does GM really think that a Morgan i-banker is going to trade the Bentley on a DTS? Really?

  • avatar

    Same as it ever was,
    Same as it ever was…

  • avatar
    mikey

    Hey!… Are we not supposed to be the “Best & the Brightest”? How many of us have dickered a car dealer, new or used down to his rock bottom?. Right,then we ask him to throw in floor mats.

    Then we go brag to our buddies, wether we got the mats or not.

    • 0 avatar
      Ron

      I’m with Mikey. It doesn’t hurt to ask.

      3.0% may be the fee for a small IPO, but this is a huge one. The cost of a large underwriting is barely higher than for a small one. You fill out the same boilerplate for a red herring, spend the same amount of time on the phone seeking investors and on the plane traveling to roadshows, etc. I can assure you that investment bankers will be able to buy scores of Bentleys from this deal even if they offer financial incentives for their clerical staff and back office to buy GM.

  • avatar
    mtymsi

    At least GM is thinking out of the box a little bit to generate sales.

    sales rule #1: if you don’t ask for the sale you are much more unlikely to consummate it (aka if you don’t ask you don’t get)

  • avatar
    Rusted Source

    We’ll scratch your back if you scratch our balls.

  • avatar

    That’s how it works on Wall Street, Ed. If you don’t push and push and push and push to the bare ragged edge of what might be a reasonable request, they think there’s something wrong with you.

  • avatar
    John Horner

    Considering the massive amount of fees and spread money that a firm gets doing a company’s IPO, nothing is too much to ask in return.

  • avatar
    werewolf34

    No way an i-banker is caught in less than a BMW

  • avatar
    ccttac

    I’ll bet it helps sell a fair amount of cars. Investment banks have tons of employees making well under $100,000/year. If they offer extra $5000-$10000 rebate assistance to employees the deal could be too good to pass up. Maybe devote 10% of gross fees to this program – still a ton of money. And, maybe helps the stock some too.

  • avatar
    Cammy Corrigan

    “After beating them down on fees they want another pound of flesh.”

    You’d have thought that GM, of all people, would have learnt that putting the thumbscrews on your suppliers seldom yields good results…

  • avatar
    lahru

    Asking for the sale is all part of the game and GM’s IPO will be a big one and I detect a bit of if you guys want the fees?, buy our cars, and there is nothing wrong with that. GM getting aggressive, that’s new. Have they lost the hubris that pervades the RenCen? We’ll see. Now, if GM made them all buy Volt’s that would be ballsy!

  • avatar
    obbop

    How about a firmly-written plain-language no fudging we, GMC, will actually truly without fail ACTUALLY honor the guaranty/warranty we offer without fail and NOT use lame excuses to weasel out of honoring that warranty/guaranty because it would cost us some money.

    MAYBE that would assist in convincing some potential buyers though after my horde of negative experiences with GMC/Chevy and their refusal to repair so many defects that I will NEVER be suckered in again.

  • avatar
    blowfish

    The harsh reality forcing every single one of the I-bank staffs including minor, janitorial, security anybody under their sun is not going to cure all the GM’s ills, but every car sales is going to help.

    This move will unload a few hundred or so.

    GM mind as well use Barter, gave Ibankers so much in GM coupons.
    Can only be redeemed by buying a GM car.

    Is kind of another Pyrrhic battle, is now or never too.

  • avatar
    daga

    Cool – watch for great deals on lightly used CTS-V’s in Manhattan in January.

  • avatar

    Years of negotiating against the UAW may have taught GM management that a complete lack of shame is a valuable asset.

    • 0 avatar
      mikey

      Gee I’m booked in for a root canal, and a new crown. As retired UAW/CAW member, I’m going to really try and feel some shame as I submit that honking bill to the insurance company.

  • avatar
    GarbageMotorsCo.

    Anything! to get rid of unwanted product, right?

    The rental companies buy 40%, now the ibankers take another few percent and the rest of us get paid in hefty incentives to buy the rest of them.

    Sounds like GM is in stellar shape!

  • avatar

    This might be the first time I disagree with the B&B consensus: bravo to GM (or our government) for putting the screws to financial institutions. If the banks don’t like it, they can cry on their beds made of money…because the fees they charge for everyone else’s IPOs are downright criminal. Well, maybe not.

    But I still I like it when IPO-ing companies try to shake things up: the Google IPO and the Playboy interview fiasco is another great example.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India