When GM announced an Initial Public Offering (IPO) of common stock back in August, investors sat up and took notice.
The mere fact that the automaker was considering to trade shares on the markets once again was a sign that perhaps, things were gathering steam once again. Now, the General has upped the size of its stock offering from 365 million to 478 million shares, which will be sold for between $32 and $34 each (this is up from the $26-29 a share that was originally forecast). In addition the company will also sell $4 billion worth of preferred shares, largely in response to buoyant demand.
If the underwriters of the deal decide to exercise an overallotment provision, the IPO has the potential to raise as much as $18 billion in common stock and $4.6 billion in dividend paying shares for GM.
However, with the US Treasury having acquired 61 percent of General Motors as part of the bailout and restructuring agreement, the company would need to achieve a market value of approximately $66 billion, for the amount of investment by the US government, on the backs of taxpayers to break even. However with today’s IPO it’s hoped that the amount of money generated from the share offering will allow GM’s CEO Dan Ackerson to return a healthy portion of the $49.5 billion in bailout funds GM received last year. It will also likely reduce the US government’s stake in the company to around 26 percent, though the Treasury will still be taking a hit on the deal, unless the shares climb to more than 50 percent of their projected value.
However, despite the apparent good news, GM has cautioned that despite making a third quarter net profit of some $2.16 billion this year, it’s fourth quarter earnings will likely be lower because of the costs of launching new vehicles and ongoing struggles with its European operations.
[Source: Automotive News]