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GM gets ready for public stock offering

June 23, 2010



GM gets ready for public stock offering


Carmaker to file statement soon; IPO could come in Nov.



Detroit News Washington Bureau


The registration statement also will announce that Morgan Stanley and JPMorgan Chase & Co. will be lead underwriters for the sale of part of the U.S. government’s 60.8 percent stake in GM. The sale could take place before the November election.

The two banks, and smaller underwriters, are expected to share a fee for handling the sale, which could range from $75 million to $150 million based on the stock sold — lower than most IPOs, according to one U.S. Treasury Department official.

"General Motors is going to have an IPO," White House chief of staff Rahm Emanuel told ABC in an interview this week. "We’re righting an industry that was not doing itself, or the American people or its workers, the right thing."

The Treasury also has hired New York investment bank Lazard Frères & Co. to advise it on GM’s stock offering.

An IPO will allow GM to again be a publicly traded company, the first step toward the government selling its ownership stake.

The initial selling price also will provide an early snapshot of how much taxpayers will recoup from their $50 billion rescue of the automaker. By some estimates, taxpayers could lose $10 billion or more on the bailout.

Treasury Secretary Timothy Geithner said Tuesday the IPO would come in the fourth quarter or early next year. He also said the government’s projected losses on the auto industry bailout continue to narrow.

"The auto industry has … undergone significant restructuring, and its prospects for repaying the government have improved," Geithner told the Congressional Oversight Panel that oversees the auto bailout fund.

GM spokeswoman Renee Rashid-Merem declined to comment on the timing of an IPO.

After a registration statement is filed, GM must get approval from the Securities and Exchange Commission before it can hold an initial public offering.

The registration statement will include detailed financial information about GM. It also will likely indicate how much stock the government is willing to sell, and how many shares can be sold to the underwriters, which can profit by selling them.

The Treasury swapped $43 billion of its $50 billion bailout for 60.8 percent of GM, and holds $2.1 billion in preferred shares.

Some Wall Street analysts predict the government will sell a third of its stake — roughly 100 million of its 500 million GM shares — in an initial sale.

That first sale could raise between $10 billion and $15 billion or more, which would put it among the three largest IPOs in history. One Treasury official said a GM stock sale could raise more than $20 billion and could end up as the largest IPO in history.

Kirk Ludtke, a senior vice president and auto industry analyst at CRT Capital Group LLC in Stamford Conn., said a GM IPO "is largely subject to market conditions: How willing are investors going to be to take risks?"

Investors may see just one more quarterly earnings report before having to decide whether to invest in post-bankruptcy GM.

"Obviously, the company has to perform," Ludtke said. "We know the government wants to monetize its position quickly and before the November elections."

GM posted a first-quarter profit of $865 million and has said it will invest $3 billion this year in its plants. The company has repaid $6.7 billion in outstanding U.S. government loans and $1.4 billion to Canada.

It’s unclear how many shares other GM owners will be offered in an IPO. A United Auto Workers retiree health care trust fund holds 17.5 percent of GM, while the Canadian federal and Ontario governments hold 11.7 percent.

Ontario Premier Dalton McGuinty said the Canadian governments will be "patient" before deciding when to sell GM stock swapped for $9 billion in loans.

A bankruptcy court will have to decide how and when bondholders of the pre-bankruptcy GM will be able to sell their 10 percent stake in the new GM.

The White House has been defending its unpopular decisions to rescue GM and Chrysler Group LLC, and is considering sending President Barack Obama on visits to auto plants this summer.

GM’s performance is certain to remain a political football in this congressional election year.

Many Democrats have noted that at least 1.1 million jobs would have been lost if the companies had been allowed to collapse.

Republicans have accused the administration of exercising undue influence over the company’s management and said GM misled the public over its repayment of government loans.

— General Motors Co. plans to file as early as next week a detailed statement outlining its proposed initial public stock offering, according to officials familiar with the planning.


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