By on November 1, 2010

Reuters has followed up its look inside the Government’s involvement in GM with a breaking report on the specifics of The General’s IPO. According to Reuters sources, the IPO will include 365 million common shares for $26 to $29 each, for a total of between $9.5b and $10b. The Treasury is expected to sell between $1.5b and $2b of its 61 percent stake in GM, likely to “four or five sovereign wealth funds,” bringing its stake down to 43.3 percent. The Canadian and Ontario governments are expected to sell down their stake from 11.7 percent to 9.6 percent, while the UAW VEBA trust-owned stake is likely to to drop from 17.5 percent to 15 percent. A Reuters source concludes that

The IPO would likely value the entire company at close to $60 billion, below the $67 billion needed if U.S. taxpayers are to break even on the common stock held by the Treasury

The WSJ adds

At the midpoint of the proposed price range, GM’s stock outstanding, including warrants, would be worth about $50 billion, roughly the same level as Ford Motor Co. The IPO’s underwriters are hoping to sell at the top end of the range, and for the stock to rise 20% or more when trading begins. At that level, GM could be worth $60 billion or more.

According to the Reuters report

GM is expected to begin its IPO roadshow on Wednesday. It is expected to price its IPO on November 17 and begin trading on the New York and Toronto stock exchanges on November 18… GM will have two groups for the roadshow whose stops will include New York, Boston and key financial points in Europe, Asia and the Middle East

That the government is reducing its stake by only a couple of billion dollars comes as no surprise; former CEO Ed Whitacre was said to have left over the government’s unwillingness to completely liquidate its 61 percent stake in the automaker. That the Treasury will sell its stake largely to Sovereign Wealth Funds is a bit surprising, in that such a purchase is likely to carry some form of political backlash along the lines of the Dubai Ports World controversy. We also expected the UAW VEBA fund to drop more of its equity during the IPO.

Perhaps most interesting of all is the implied market cap valuation of between $50 and $60b. Given that Ford is making mad money and closing in on a $49b market cap, it’s hard to imagine The General  being worth much more. And then there’s the symbolic value of the $50b valuation: that’s approximately the amount Treasury spent on direct aid to GM. If the market says GM is worth less than the $50b taxpayers put into the company, the auto bailout will certainly be seen in a more jaundiced light. We’ll keep an eye on developments as GM moves towards kicking off its IPO roadshow.

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8 Comments on “GM IPO: $10b Of Common Stock, $3b Of Preferred Stock...”


  • avatar
    SkiD666

    I don’t think Reuters calculated the numbers right.

    Going from 61% to 43.3% for only $1.5B to $2B doesn’t make any sense.

  • avatar

    “That the Treasury will sell its stake largely to Sovereign Wealth Funds is a bit surprising, in that such a purchase is likely to carry some form of political backlash…”
    Well, why should GM be better off than, e.g., Daimler? Who else is going to buy those shares in large quantities? There are no real alternatives, IMHO.

  • avatar

    General Motors Death Watch Ad Infinitum. British Leyland redux: Death by 1.5 billion Cuts.

    • 0 avatar
      John Horner

      I’m curious, do you still have the same view of Ford you did back in October 2009?
      “And so, with the best intentions and will in the world, get ready to bail out Ford. They simply can’t compete with America’s nationalized automaker and its Italian twin-under-the-skin in a down market. Not because their rivals are so good. Ford’s problem: GM and Chrysler have been propped-up with your tax money, keeping Dearborn’s darlings from enjoying the fruits of their foresight. The Motown bailout queens are oxygen thieves. Make no mistake: Ford is still gasping for breath.”
      http://www.thetruthaboutcars.com/2009/10/ford-death-watch-49-gypsies-tramps-and-thieves/#more-333104
       

    • 0 avatar
      Stingray

      Ford may be making lots of money now, but they’re still in a lake of debt. Until that debt gets to a more reasonable size, Ford will be fighting for life.

    • 0 avatar
      segfault

      +1.  The pic at the top of this post is very fitting.

  • avatar

    Cool, time to get even with the China and Dubai, cut ‘em a deal. They’ll love it.

  • avatar
    John Horner

    Principle shareholders putting little or none of their stock into an IPO is standard banking practice. The IPO event creates a public market for the stock, but you almost never actually float anything close to the majority of outstanding shares at the initial offering. That is why it is called an initial offering, not the only offering or the final offering.
    Assuming Reuters has it right, about 20% of GM will be offered at the IPO. That is a pretty normal things to do.
     
     


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