GM Asks IPO Underwriters To Buy Its Cars

Edward Niedermeyer
by Edward Niedermeyer
gm asks ipo underwriters to buy its cars

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?

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  • Daga Daga on Jul 14, 2010

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

  • The Comedian The Comedian on Jul 15, 2010

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

    • Mikey Mikey on Jul 15, 2010

      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.

  • GarbageMotorsCo. GarbageMotorsCo. on Jul 15, 2010

    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!

    • Mikey Mikey on Jul 15, 2010

      Forty percent to rentals?..Mr Garbage could you tell us where you pulled that info from?

  • Sajeev Mehta Sajeev Mehta on Jul 15, 2010

    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.