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
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.