GM Said to Have Disagreed With Treasury Over IPO Price Range

Bloomberg

General Motors Co. and its government owners disagreed over the price for the automaker’s initial public offering before settling on a range between $26 and $29 a share, according to eight people familiar with the matter.

The U.S. Treasury was seeking a split-adjusted price of $30 a share, referred to as the “Obama number” by officials in the administration, said the people, who declined to be identified because the talks were private. At that price, the government could say it recovered all the money spent on GM’s bailout under President Barack Obama, though not what his predecessor put in.

GM and its bankers for weeks had pushed for an IPO price in the low-to-mid $20s to help ensure demand and a significant gain on the first day of trading, the people said. The United Auto Workers retiree health-care trust and the Canadian government, which are also shareholders, sought a $30 offer price as well to maximize their return.

“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.”

Over the past month, Detroit-based GM and its bankers agreed to a higher offering price range as they watched rival Ford Motor Co.’s shares rise, said two people familiar with the matter. At a meeting in mid-October, the parties settled on $25 to $29 a share. As Ford shares climbed, they boosted the bottom of the range.

Ford Rising

Ford advanced to a six-year high yesterday after saying its U.S. vehicle sales rose 15 percent in October. The shares gained 75 cents, or 5.2 percent, to $15.18 in New York Stock Exchange composite trading, bringing the increase for the year to 52 percent. The Dearborn, Michigan-based automaker’s market capitalization has reached $52 billion.

At the midpoint price of $27.50 each, GM would have a market value of $41.25 billion, based on 1.5 billion shares that will be outstanding after the offering, according to the company’s filing and data compiled by Bloomberg.

President Barack Obama wants to recover as much of the taxpayer’s $80 billion investment in the auto industry as possible, two of the people said. The Treasury department cut its expected losses to $17 billion in August from an estimate of $28.2 billion a year ago.

“You now have all those U.S. auto companies showing a profit,” Obama said in an interview on the ABC-TV program “The View” in July. “They’ve rehired 55,000 workers. We are going to get all the money back that we invested in those car companies.”

Obama’s Money

Obama was referring only to the money his administration spent rescuing the auto industry, not the $13.4 billion in aid granted under President George W. Bush, according to the White House.

With a 3-for-1 share split, the U.S. government needs an average share price of almost $44 to get back all of the $49.5 billion it put into the automaker under Bush and Obama. That is based on the $131 a share breakeven level cited by a person familiar with the matter in September.

Including the repurchase of the Treasury’s preferred shares after the IPO, taxpayers will have received $9.5 billion in repayments, interest and dividends from GM since the automaker emerged from bankruptcy in July 2009, according to the Treasury.

Take away those payments and the money invested under Bush, and the Obama administration’s figure drops to $26.6 billion. With 912.4 million shares that Treasury currently owns, it can cover that if it gets an average of $29.15 a share. It plans to sell 263.5 million shares in the IPO.

A Treasury spokesman, Mark Paustenbach, and Noreen Pratscher, a GM spokeswoman, declined to comment about the pricing decision.

Market Value

GM’s underwriters, including Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., pushed in meetings over several weeks for a lower price that would ensure the offering would be oversubscribed and value GM at a lower level relative to earnings before interest, taxes, depreciation and amortization, also called Ebitda, than Ford, said six of the people.

After weeks of negotiations, the Treasury, the UAW and the Canadian government settled with GM and its underwriters on a price that was between what the two sides wanted, said the people.

The Treasury department agreed that it would be beneficial to start with a lower price so the shares would rise on the first day, creating good publicity for the offering, two of the people said. The Canadian government and the UAW health-care trust, which own 11.7 percent and 17.5 percent of GM, respectively, sided with the U.S. Treasury, five people said.

CEO Gap

GM’s underwriters argued that the automaker will trade for some time at a lower Ebitda multiple than Ford, said these people, because investors would favor the experience of Ford’s Chief Executive Officer Alan Mulally, who has been with the company since 2006. GM CEO Dan Akerson took over three months ago after serving a year on the automaker’s board.

The Treasury and GM’s banks project that the shares will quickly climb above the $30 level, said the people, because the automaker has more business than Ford in some of the world’s fastest growing economies from China to Brazil.

GM and Ford yesterday reported U.S. sales increases that topped analysts’ estimates in the best month yet this year. GM’s deliveries climbed 3.5 percent to 183,759, when the average of three analysts’ forecasts was for a 6.3 percent decline, while sales at Ford increased 15 percent to 157,935, topping the 14 percent average of six analysts’ estimates.

GM expects IPO to Reduce Taxpayers' Stake to about 43%

USA Today

The initial offering of General Motors stock is expected to raise about $10 billion in a sale that will cut the U.S. government's stake in GM to below 50%, three people briefed on the sale said.

GM common stock is expected to sell for $26 to $29 a share when the IPO takes place, tentatively Nov. 18, according to the three people, who asked not to be identified because they are not authorized to speak on the matter. That would value the company at more than $46 billion, roughly the same as Ford Motor.

U.S. taxpayers, who bailed out GM last year, would see their ownership drop from 61% to about 43%, not including any extra shares bankers could offer if there is strong demand, the people said.

GM has wanted to shed government control, contending that it hurts the company's sales and public image. The government will get most of the $10 billion and recoup another chunk of the more than $50 billion GM rescue.

GM will not make any money from the sale of the 365 million common shares that will make up the IPO but will sell roughly $3 billion in preferred stock that will convert to common stock in 2013, the people said. Preferred shares pay a set dividend and are more like bonds. GM will use that money to repay loans and make pension payments.

Terms of the sale are not final because GM's board could still change them, one of the people said. GM's final registration filing with the government is expected by today.

GM and its bankers then will begin a "road show" to woo investors, primarily pension and mutual funds, but also some large individual investors. Common shares worth roughly $2 billion would be sold to investors in the Middle East, Europe and Asia, one of the people said.

Bankers leading the sale are recommending that the final share price be revealed Nov. 17 and the sale take place a day later, according to the people.

GM is now a private company owned by the U.S. government, a United Auto Workers retiree health trust, the Canadian and Ontario governments and former GM bondholders.

The Canadian governments are expected to cut their stake from 11.7% to 9.6%, while the UAW trust would cut its stake from 17.5% to 15%, two of the people said.

GM has repaid or plans to repay a total of $9.5 billion in government loans, and the government hopes to recoup its remaining $40 billion investment with the initial stock sale and several follow-up sales.

The four owners hold about 500 million shares total, but the total shares for sale in the IPO and subsequent sales will be increased with a 3-to-1 or 4-to-1 stock split, one of the people said. The split, which will take place before the IPO, will create about 1.6 billion shares of GM common stock, one of the people said.

GM Stock Sale's break-even Equation

The Wall Street Journal

As General Motors Co. plans its initial public offering for next month, and readies its "road show" for the sale next week, some bankers and analysts say the shares could reach a high enough price for the U.S. to come close to breaking even on its 2009 bailout of the car maker.

But there's one big caveat: The stock would have to remain at that price over the many months or perhaps years it will take the government to sell its GM majority stake.

The U.S. Treasury is under pressure from banks underwriting the deal to maximize the number of shares it sells in the IPO, which is expected to take place about Nov. 18, said people familiar with the situation. The banks want to make sure there are enough shares to meet investor demand.

The Treasury is seeking to sell roughly $6 billion to $8 billion of its GM stock through the IPO, with other sellers taking the entire deal to a total of roughly $10 billion to $12 billion.

The government paid $40 billion for its stake, and risks political fallout if the share price sinks due to releasing too many shares at once on the market. That could send a signal the Obama administration won't recoup its investment.

While estimates of GM's stock valuation vary widely, one analyst at a research firm focusing on distressed companies said GM has a current implied market value of about $70 billion.

That calculation by Kirk Ludtke of CRT Capital Group LLC in Stamford, Conn., indicates a value for the U.S. stake of $35 billion, roughly $5 billion short of what the Treasury still has invested in the Detroit auto maker.

Mr. Ludkte said his measurement is based on the current trading price of GM's public debt. He thinks GM's market value could even top $82 billion six months after the IPO—potentially enough for the government to show a small profit.

The CRT calculation is in line with what some others are saying. Two bankers close to the IPO estimate the market value could be $60 billion to $70 billion.

Linda Killian, a principal of Renaissance Capital LLC in Greenwich, Conn., which specializes in IPO research, estimates GM's valuation at $50 billion to $70 billion, yet added that the chances of the government breaking even are "low."

Because the IPO should take place at a discount to the market price, the government is likely to show a big loss in realized proceeds on its sales on IPO day.

If the IPO is priced at the $50 billion level, that would equate to a U.S. loss of approximately 38% on the first batch of shares it sells.

 Also, because there will be so much GM stock still to be sold even after the IPO, that will weigh on its valuation, Ms. Killian said. "Potential buyers are going to take that into consideration," she said.

Former investment banker and ex-White House auto czar Steven Rattner said Wednesday that any losses the U.S. will sustain from its investment "will be single digit" billions.

GM plans to launch its road show presentations to institutional investors for the IPO shortly after Election Day next Tuesday, in hopes of pricing and selling the shares shortly before Thanksgiving.

As part of the road show, GM Chief Executive Daniel Akerson, who took his post Sept. 1, will lead two teams of senior executives who will try to persuade investors to buy the stock, said people familiar with the matter.

One team will include GM Vice Chairman Steve Girsky, finance Vice President Dan Ammann and North America President Mark Reuss.

The other will include Chief Financial Officer Chris Liddell, manufacturing chief Tim Lee and product chief Tom Stephens. Mr. Akerson will trade off between the groups.

Stops are planned at about 10 cities in the U.S., Canada and Europe, but not Asia, said the people familiar with the plans.

Mr. Akerson and Mr. Girsky already have made trips to Asia and the Middle East in order to talk to investors and money managers.

Some money managers say they would be leery of GM stock at the price levels being discussed.

"Would I jump at the GM deal? Probably not," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. He said the "overhang of government ownership" results in a "management straitjacket" that could require GM executives to "get permission every time they want to extend a bonus to somebody."

 Robert Pavlik, a senior partner at investment advisers Banyan Partners LLC in Palm Beach Gardens, Fla., said he "wouldn't put my clients' money into it" because GM still carries the "stigma" of both bankruptcy and government ownership as well as recent top-management turnover.

"What's going to drive their sales? The Chevrolet Volt? I think that's going to turn out to be more of a publicity stunt than anything else," Mr. Pavlik said.

The stock valuations some on Wall Street are placing on GM mean it could be worth more than its more successful rival Ford Motor Co., which avoided bankruptcy and has a $48 billion market capitalization.

Mr. Ludtke, the CRT analyst, explained the seeming disparity by saying GM has higher sales, a stronger balance sheet and "a much stronger position in the emerging markets" such as China than Ford.

He estimated GM's 2010 sales will be $128 billion while Ford's will be $108 billion.

GM also was able to slash its debt via its 2009 bankruptcy to $8 billion from $46 billion in 2008. With $33 billion of cash on hand at midyear, GM had net cash (factoring in debt) of $25 billion.

By comparison, Ford at midyear had $22 billion of cash but $30 billion of debt, so it had net debt of $8 billion. (Ford said Wednesday its debt had fallen to $26.4 billion as of Sept. 30.)

A report by Moody's Investors Service indicates that Ford and GM have roughly comparable debt positions, when leases and pensions are taken into account.

GM's IPO Shows Ally Could Afford to Repay $17 Billion Bailout

Bloomberg

 

Ally Financial Inc., the recipient of more than $17 billion in U.S. aid, may be able to repay its bailout in full with a profit for taxpayers if General Motors Co. is right about the value of its stake in the auto lender.

GM, Ally’s former parent, pegged the value of its 6.7 percent holding at $1.14 billion, according to a prospectus for the automaker’s initial public offering. That implies a $17 billion price for all of Ally’s common shares and would make the 56.3 percent U.S. stake worth $9.6 billion. Taxpayers could come out ahead if the government sells its $14.1 billion of preferred securities in Ally, formerly known as GMAC Inc.

“The valuation of the equity looks realistic,” said Kirk Ludtke, senior vice president for CRT Capital Group LLC in Stamford, Connecticut. “They’re getting close” to being able to fully repay the bailout, he said.

Ending U.S. assistance could ease pressure on President Barack Obama, who’s facing calls to withdraw support from the private sector, and let Detroit-based Ally shed the stigma of a government bailout. The Congressional Oversight Panel, which acts as a watchdog for the Troubled Asset Relief Program, predicted a $6.3 billion to $10 billion shortfall from Ally last March, saying the government may “squander” bailout funds.

Chief Executive Officer Michael Carpenter, 63, has said an IPO could happen as early as next year. GM’s offering may come in November, people familiar with the matter have said.

Ties to GM

Ally was the in-house finance arm of Detroit-based GM under the GMAC name. The unit was sold to a private-equity group led by Cerberus Capital Management LP in 2006. The company almost collapsed after subprime loans made by the Residential Capital mortgage unit soured. Ally, which is still the primary lender to dealers at GM as well as Chrysler Group LLC, benefited from three U.S. bailouts totaling $17.2 billion.

“Treasury’s consistent goal has been to protect the taxpayers’ investment,” David Miller, the chief investment officer at the Treasury Department’s Office of Financial Stability, said in a statement. “We expect that management will continue to build on the progress they have made thus far.”

Ally bolstered its funding by attracting deposits to its Internet bank, using above-average interest rates and an advertising campaign that shows competing bankers cheating little children. The company has been profitable this year after a loss of more than $10 billion in 2009.

Ally’s five-year credit-default swaps, which insure investors against bond defaults, fell 10 basis points to 430 basis points today, the lowest level since Aug. 10, according to data provider CMA. A basis point is 0.01 percentage point.

Possible Shortfall

GM’s calculations of Ally’s value match the estimate of Francis Gaskins, president of IPOdesktop.com in Marina del Rey, California, who said the lender is likely to command a market capitalization of $17 billion to $20 billion. The low end could vault Ally into the ranks of the 10 biggest U.S. commercial banks.

In addition to its common stake, the Treasury holds $11.4 billion in preferred shares convertible into common and $2.67 billion of trust-preferred securities. On top of that, the government has received $1.63 billion in dividends, according to a Sept. 10 report from the Treasury. Cerberus’s 14.9 percent stake in Ally is worth $2.54 billion, according to GM’s filing. Tim Price, a spokesman for Cerberus, declined to comment.

Ally’s repayment could fall short if GM’s stock sale isn’t well-received, analysts said. The automaker will try to raise as much as $16 billion in what would be the second-largest IPO in U.S. history behind Visa Inc., which raised more than $19 billion in 2008.

Too Soon

“The GM offering is critical,” said David Menlow, president of Millburn, New Jersey-based IPOfinancial.com. “You could see a shaving off of between 15 to 20 percent on the valuation of Ally” if the GM IPO goes poorly, he said.

CreditSights Inc. analyst Adam Steer and Kathleen Shanley, a senior bond analyst at Gimme Credit LLC in Chicago, said it’s too early to place a value on an Ally IPO. The lender’s success at transforming into a deposit-based bank and the end to losses tied to home loans are still unproven, they said.

“Ally faces unique issues such as the resolution of its ResCap business, as well as funding and regulatory challenges over the next few years,” Shanley said in an e-mail. Losses at ResCap exceeded $10 billion.

‘Big Player’

An IPO that places Ally in the upper ranks of banking companies “doesn’t strike me as crazy,” said Steven Kaplan, professor of finance at the University of Chicago’s Booth School of Business. “They are a big player.”

Gaskins based his analysis in part on the price paid by GM in July when it purchased subprime auto lender AmeriCredit Corp. for $3.3 billion, or about 1.4 times book value.

Over the past five years, companies paid a median of 2.05 times owners’ equity on five deals in the auto-finance industry, according to Bloomberg data. Ally reported $20.8 billion in shareholders’ equity at the end of June.

The AmeriCredit deal led Carpenter to proclaim that Ally could be worth as much as $30 billion.

“I love the AmeriCredit deal,” Carpenter said on the company’s conference call Aug. 3. “I don’t have any doubt about our ability to repay.”

GM Files for Landmark IPO to Repay Bailout

CNBC

General Motors filed for an initial public offering of stock on Wednesday, clearing a key hurdle toward repaying taxpayers for a controversial bailout just over a year after its bankruptcy.

Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Citigroup have been selected as the lead underwriters for the IPO by the top U.S. automaker.

GM's initial filing with U.S. securities regulators did not say how many shares would be sold or give an expected price range for what will likely be one of the biggest IPOs ever.

GM filed for an IPO of up to $100 million. That does not represent the full amount that GM hopes to raise, people familiar with the situation have told Reuters. GM could raise up to $20 billion in its IPO, the people said.

Attention has increasingly focused on the amount the IPO will raise, and if it will be enough, as some suggest it should be, to repay taxpayers on the hook for the controversial bailout.

"If GM is valued in that $60 billion to $70 billion range, that gets the taxpayer paid back. But the question is, is that achievable for a company that is a year out of bankruptcy...?" said Brad Coulter, director of O'Keefe and Associates.

"Personally, I think they should wait and prove out their earnings," Coulter added.

Scott Sweet, senior managing partner of IPO Boutique, agreed GM has a lot to prove before investors should consider it a worthy investment.

"They still have problems and their problems are large," Sweet said.

"One of them specifically is in Europe. They missed the chance to sell Opel. As a result, they're losing several hundred million dollars. It's an ongoing problem and it's an albatross right now. They're likely only going to be able to get dimes on the dollar for Opel now. They brought in all these new managers and they still couldn't clean it up," he added.

The automaker said it planned to list the shares on the New York Stock Exchange and the Toronto Stock Exchange.

Trading in GM shares is expected to start between late October and the U.S. Thanksgiving holiday, which is the fourth Thursday in November, according to people involved in the process. A stock offering in late October would mean trading would start just before the November congressional elections.

The Obama administration wants to be able to cast the $50 billion GM bailout as a financial success in the face of public skepticism and Republican political opposition.

How to Play the GM IPO and the Auto Industry

CNBC

General Motors filed for an initial public offering of stock on Wednesday, clearing a key hurdle toward repaying taxpayers for a controversial bailout just over a year after its bankruptcy.

The initial filing with U.S. securities regulators did not say how many shares would be sold or give an expected price range for what will likely be one of the biggest IPOs ever. It filed for an IPO of up to $100 million. That does not represent the full amount that GM hopes to raise, people familiar with the situation have told Reuters. GM could raise up to $20 billion in its IPO, the people said.

The automaker said it planned to list the shares on the New York Stock Exchange and the Toronto Stock Exchange. Trading in GM shares is expected to start between late October and the U.S. Thanksgiving holiday, which is the fourth Thursday in November, according to people involved in the process.

So what does this mean for investors?

Guy Adami, managing director at Drakon Capital, likes the GM IPO for the auto industry. He recommends looking at BorgWarner [BWA  47.07  ---  UNCH  (0)   ], which is an auto parts manufacturer based in Auburn, Hills, Mich. The stock is pushing against a 52-week high, Adami said. UBS put it on a conviction buy list. He thinks valuations are "reasonable" and being as we're in a benign tape, he thinks BWA is the way to go.

Buy Ford Motor Co. [F  12.20  ---  UNCH  (0)   ] if the share price drops to $11.50, said Pete Najarian, co-founder of optionMONSTER.com. He thinks that could happen because there is "a lot of appetite" for the GM deal. Ford's share price could fall if investors leave for GM.

What Ford has going for it that GM doesn't, said Joe Terranova, chief market strategist at Vitrus Investment Partners, is Alan R. Mulally. Adami agreed and praised the 61-year-old Ford executive.

GM Said to Consider Sale of Preferred Stock With IPO

Bloomberg

General Motors Co. may sell preferred stock alongside its initial public offering of common shares, according to a draft of its regulatory filing and two people briefed on the plan.

GM would get proceeds from the preferred offering and will not sell shares itself in the common offering, according to the draft and the people, who declined to be identified because the filing hasn’t been publicly released. The Detroit-based automaker will seek to raise $12 billion to $16 billion in the IPO, a person familiar with the plan said last week.

The initial offering would be the second-largest in U.S. history, behind Visa Inc.’s $19.7 billion IPO in March 2008. Outgoing Chief Executive Officer Ed Whitacre has pushed to end government ownership of the company, which received a $50 billion taxpayer bailout following its bankruptcy in June 2009.

The U.S. Treasury will offer some of the common shares it holds in GM, according to the people, who verified details of the IPO registration draft that may be modified before its final version is filed with the Securities and Exchange Commission this week. The offering is code-named “Project Dawn,” according to the document.

Randy Arickx, a GM spokesman, declined to comment, as did Mark Paustenbach, a spokesman for the Treasury.

The preferred shares were added to attract hedge funds and other new investors because the shares have attributes of both debt and equity, the people familiar with the plans said.

NYSE, Toronto Exchange

The common shares will be listed on the New York Stock Exchange and the Toronto Stock Exchange, while the preferred stock would be listed on the NYSE, according to the draft and the people. The preferred shares will be convertible to common stock at a price that wasn’t specified and are contingent on the completion of the common share sale, according to the details in the draft confirmed by the people. The proceeds will be used for general corporate purposes.

GM aims to sell a fifth of the Treasury’s 304 million shares, two people familiar with the plan said in June. That would cut the government’s stake to less than 50 percent.

Whitacre, 68, said last week that he would step down as CEO Sept. 1 and as chairman at the end of the year, ceding both titles to Dan Akerson, a managing director of the Carlyle Group. Akerson, 61, has been on GM’s board since July 2009 and previously served as chairman and CEO of XO Communications, Nextel Communications and General Instrument Corp.

Underwriters

The Treasury, which retained veto power over GM on the selection of underwriters and fees, agreed to have JPMorgan Chase & Co. and Morgan Stanley of New York lead the offering, people familiar have said, while other banks including Bank of America Corp. and Citigroup Inc. are also involved in the IPO.

Goldman Sachs Group Inc. of New York didn’t get a top role even after offering to accept a fee of 0.75 percent, which was then imposed by the government on all underwriters, people familiar have said.

GM also has obtained a revolving line of credit worth as much as $5 billion from a group of at least 15 banks, including Morgan Stanley, JPMorgan, Citigroup, Bank of America and Zurich- based Credit Suisse Group AG, a person said last week.

The automaker may hold the offering in November, people familiar with the matter have said. The automaker also may sell stock owned by Canada and a union-led retiree health-care trust, a person familiar with the matter has said.

GM Said to Aim for Up to $16 Billion in Stock Sale

Bloomberg

 

General Motors Co., the automaker 61 percent owned by the U.S., is seeking to raise $12 billion to $16 billion in an initial public offering, said a person familiar with the plan.

The more than 500-page document, called an S-1, is likely to be filed tomorrow, though it may not happen until Monday, said the person, who asked not to be named because the discussions are private. The exact value of the offering may not be fully detailed in the registration statement filed with the U.S. Securities and Exchange Commission, said the person.

The IPO would be the second-largest in U.S. history, behind Visa Inc.’s $19.7 billion initial offering in March 2008. The share sale is also the first step in freeing the Detroit-based automaker from government ownership, which Chief Executive Officer Ed Whitacre has pushed for after GM’s $50 billion taxpayer bailout in the wake of its bankruptcy in June 2009.

“After the restructuring, I expect GM to once again be a leading company on the U.S. stock market,” said Kim Yong Tae, who helps manage $2.9 billion equivalent of assets at Yurie Asset Management Co. in Seoul. “The U.S. government has shown a strong will to revive GM. It’s a stock I want to add to my portfolio.”

Credit Line

GM has obtained a $5 billion revolving line of credit from a group of at least 15 banks as of last night New York time, said the person. More than half are named in the draft of the document as underwriters, including Morgan Stanley, JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Credit Suisse Group AG.

Selim Bingol, a GM spokesman, declined to comment on details of the IPO.

“We will do an IPO when conditions are right for the company and in the markets,” he said in an e-mail.

GM today reported second-quarter net income of $1.54 billion on higher sales in the U.S. and China. Earnings before interest and taxes climbed to $2.03 billion from $1.82 in the first three months of the year, the company said in a statement. Revenue rose 44 percent from a year ago to $33.2 billion.

The company reported $1.07 billion in first-quarter profit in May, compared with a $5.98 billion loss a year earlier.

Most of the shares offered would come from the U.S. Treasury, the person said. The aim is to sell a fifth of the government’s 304 million shares, two people familiar with the plan said in June. That would reduce the Treasury’s holdings to less than 50 percent.

New Shares

The automaker may sell a small number of new shares, the person familiar with the plans said yesterday. The Canadian government, the United Auto Workers union’s retiree medical trust and the estate of the bankrupt predecessor General Motors Corp. haven’t decided whether to participate in the IPO, the person said.

The document will describe the old GM, its restructuring in bankruptcy and liabilities facing the new company, the person said.

GM will report its second quarter profit today, and industry analysts are looking for strong results to set the stage for the IPO even as consumer confidence wanes.

“GM needs to be very careful about when to conduct the IPO,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management in Tokyo. “Can they convince investors to buy shares when spending is dropping in the U.S. and they don’t have leading-edge environmental technology?”

Chevrolet Volt

The largest U.S. automaker will introduce its Chevrolet Volt electric-drive car later this year. The vehicle will compete with models including Nissan Motor Co.’s Leaf electric car and a planned plug-in version of Toyota Motor Corp.’s Prius hybrid.

General Motors Corp. filed for Chapter 11 bankruptcy protection on June 1, 2009, after posting $88 billion of losses since 2004, the last year the company reported an annual profit. General Motors Co. emerged 39 days later.

As GM prepares to sell stock, investors had two main questions. First is when GM can expect to break even on its European business. The unit lost $506 million before interest and taxes in the first quarter and doesn’t expect to break even until at least 2011.

The next question is the company’s succession plan. The company has not said who will lead GM after Whitacre, 68, retires.

Commentary: GM IPO Proceeds Should Go Back to Taxpayers

CNBC

 

 

American taxpayers who spent $50 billion bailing out General Motors may see some returns, if the Obama administration allows it.

There appears to be a “new” GM emerging – one that is seeing improved sales after the firm’s massive restructuring and new car offerings, and one that’s becoming a dominant force overseas, particularly in countries like China and Russia.

So now, it's time for the government to show taxpayers if “new” GM is really strong and not just rhetoric, by planning for the automaker’s IPO proceeds to go to the people who allowed this American icon to exist.  This could be done in a few ways. 

The GM IPO could be done through a modified Dutch Auction, by advertising and providing easy to use websites to allow interested taxpayers could participate, similar to the way China and Hong Kong offer major state-owned enterprises.  The IPO could include share grants in the style of major state owned enterprises in Eastern Europe. Tax rebates could be another way.

The point is - there are options. And while the IPO underwriters have accepted a low fee to do the deal and may not want to see their profits eroded further, the U.S. government hopefully has learned from its experience in bailing out Citigroup and other banks. Loans to those financial institutions may have been repaid with interest, but it was the employees, not taxpayers, who reaped the benefits when banking stocks rebounded.

If GM really is ready to ride, some of these ideas should have traction. But if GM is still saddled with unbearable labor contracts that may send it back into bankruptcy, then the government owes America the truth.

If we can't be part of the IPO because GM is a weak company and the stock may drop, we deserve to hear that from the White House. 

Whitacre: GM can't wait to shed 'Government Motors' label

USA Today

TRAVERSE CITY, Mich. — General Motors is itching to free itself from government ownership, aiming for its initial public stock offering as soon as possible so the government can sell its stake and recoup its loans.

GM Chief Executive Ed Whitacre said Thursday that it is damaging GM's brands. "We don't like this label of government ownership," he said at the Center for Automotive Research's annual industry conference here. "People in GM are embarrassed by that. You lose your reputation and it's hard to get back."

Consumers may not be as turned off by the situation as Whitacre thinks, says Karl Brauer, senior analyst at Edmunds.com. He says a segment of the population is unhappy about the bailout. But others either don't care or favored it. "There's a strong number, maybe not an equal number, of people who are very much fans of GM who were not happy about the idea that the company could go out of business," he says. "They were happy to see it get saved."

The government converted its GM bailout loans to a 61% equity stake in the bankruptcy reorganization. When GM becomes a public company again through the IPO, the U.S. can sell its shares and recoup the money.

Steve Girsky, GM's vice chairman, wouldn't put a target date on an IPO.

"There are factors that go into this, one of which is our performance, the other is the market performance — one of which we control, the other of which we don't," he said, but added, "We want the government out, period. We don't want to be known as 'Government Motors.' "

The carmaker will post second-quarter earnings some time next week, and Whitacre promised solid results. GM posted $865 million in first-quarter net income in May.

But responding to speculation that GM also would file for the IPO then, Whitacre said GM isn't ready.

GM must file an S-1 form with the Securities and Exchange Commission, a filing that may be as big as a phonebook. It typically then takes several weeks to gain SEC approval, meaning GM must file soon if it wants its IPO before the Nov. 2 elections, though Whitacre says politics are not a factor.

Some worry that GM is rushing. Brian Krasicky, a partner at restructuring firm O'Keefe and Associates, said two or three solid quarters may not convince IPO investors: "If shares sell low, then it exposes the market's perception of GM's success story as being premature or weak."

New GM on Steady Track to IPO as Old GM Fades Away

USA Today

DETROIT — This weekend, a year since General Motors' split into old GM and new GM, the new GM is barreling toward an IPO, while the old GM languishes in bankruptcy court.

The new GM is a healthier company, one with a manageable cost structure, less debt, fewer brands and lower pension and health care obligations.

"We are a new and much different company than we were 12 months ago," CEO Ed Whitacre said recently. The company he joined last year was "shell-shocked," he said, and overly complicated. He's worked to give executives more responsibility for decision-making so things work faster.

The old GM is winding down, selling off parts and dealing with the legal morass that sucks in companies involved in complex bankruptcies.

There was fear that GM's bankruptcy would scare off customers, killing any chance of a profitable future for the new GM. Some customers have been turned off by the bankruptcy and the government's majority ownership stake in GM: About 32% of people surveyed by Cars.com recently said they wouldn't consider a GM vehicle.

But, for the most part, GM has weathered the year fairly well. Even with four fewer brands, its sales are up 14.3% year to date, just off the overall industry increase of 16.7%.

While the auto market rebound is slower than hoped, GM says it can turn a profit if industry sales are 11 million this year. June sales were at an 11.08 million annual pace, according to Autodata.

Credit the bankruptcy reorganization for getting GM's break-even point to a manageable level, says Edmunds.com CEO Jeremy Anwyl. "They got stuck," says Anwyl. "They couldn't get past a certain point, and there was no way they were going to accomplish something in the order of magnitude that was needed without bankruptcy."

Now, GM is gearing up for a public stock offering that would let the government begin recouping money lent to save it. Of more than $50 billion in loans, more than $40 billion was converted to a 60.1% stake in GM.

The company could file as early as August its application to register an initial public offering with the Securities and Exchange Commission. That could allow the IPO before the November midterm elections.

Is it too soon for a successful IPO? "I can think of several reasons why they should wait, and not one reason why they should rush," Anwyl says.