19 August 2010

GM Files for Landmark IPO to Repay Bailout


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.

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