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GM Reveals Details Regarding IPO

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On: Mon, Nov 8, 2010 at 10:40AM | By: Sherry Christiansen


GM Reveals Details Regarding IPO

General Motors has finally announced its long awaited public offering of stock which the company is hoping will yield $13 billion. GM will issue 356 million shares of common stock priced between $26 and $29 per share. An additional 50 million shares of B-series preferred stock will be sold at $50 per share. General Motors Co. had a disagreement with its government owners regarding the price of the automaker’s IPO before both entities settled on a range between $26 and $29 a share, according to undisclosed sources who stated they were familiar with the matter.

The U.S. Treasury was seeking a split-adjusted price of $30 per share, which was referred to as the “Obama number” by officials in the administration. That was the price the government would be able to recover all the money spent on GM’s bailout under President George W Bush and President Barack Obama. The Canadian government (also shareholders) has been pushing for stock prices in the $30s to maximize return as well.

But GM pushed for the price of the stock to be in the low $20s to help boost demand and to make sure there is a significant gain on the first trading days.

“If you’re a seller, you don’t want to leave money on the table,” said Maryann Keller, president of Maryann Keller & Associates in Stamford, Connecticut. “The Treasury would look stupid if they priced it at $20 and the first day of trading it closed at $29.”

It is predicted that after the initial public offering there will be 1.5 billion shares outstanding and the US government will reduced its holding from the current level of 63% down to 43%. The official date that the stock is expected to be priced is November 17th, the following day it will enter the secondary market in the New York Stock Exchange.

If the IPO goes as planned it would put GM's value at around $41 billion. For the U.S.government to recoup the rest of its investment, GM will need to reach a market capitalization of $70 billion (around $43 per share).

According to Automotive News.com: “the stock sale is being underwritten by Morgan Stanley and J.P. Morgan. BofA Merrill Lynch, Citi, Goldman, Sachs & Co., Barclays Capital, Credit Suisse, Deutsche Bank Securities, and RBC Capital Markets will be the joint book-running managers for the offering.”




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