GM offers shares, expects to raise $20 billion

Staff Report Automotive News, a Crain publication

DETROIT -- General Motors Co. has priced its public stock offering at $33 a share -- which will generate at least $20.1 billion for the carmaker, just 16 months after it emerged from its government-sponsored bankruptcy. If stock underwriters use a so-called "over-allotment" to sell additional shares, GM expects to generate $23.1 billion from the offering, which would make it the largest stock offering of all time.

“As we prepare to enter the equity markets, all of us at GM are excited about this historic milestone," GM CFO Chris Liddell said in a statement issued late afternoon 17 Nov. "We are especially appreciative of those who stood by us through the toughest times, and we are dedicated to creating value for all of our stakeholders,” he added.

The offering allows the US government to drastically cut the controlling stake it acquired when it rescued the automaker last year. Nevertheless, the US Treasury will remain GM's largest shareholder after the IPO. The stake held by Canada could fall from 12 percent to just more than 9 percent, while the retiree health care trust affiliated with the UAW could see its stake drop from almost 20 percent to 13 percent.

Responding to strong demand, GM has increased the number of common shares on offer by a third. The revised IPO terms could cut the US government's stake, now 61 percent, to as little as 33 percent.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy with sharply lower costs and higher profit potential.

Including preferred shares -- hybrid securities paying a fixed dividend that will mandatorily convert to equity -- the IPO would eclipse Agricultural Bank of China's stock offering in July, which raised a record $22.1 billion.

GM's move to raise the planned number of common shares it will sell comes a day after it boosted the price range for the IPO and increased the preferred shares on offer by a third to $4 billion.

GM had received orders worth about $70 billion for the common stock portion of the offering as of late Tuesday, a source familiar with the situation told Automotive News.

GM is the first of a slate of auto-related companies -- whose ranks include Chrysler Group LLC; Ally Bank, formerly known as GMAC; and parts supplier Delphi -- expected to return to public ownership in coming years.

Auto executives and analysts said the reversal in Wall Street sentiment toward an industry that was shut out of the credit markets in 2008 and 2009 was a positive sign.

"This will give us a great, great precursor for the Chrysler IPO. I'm delighted; it couldn't have gone better," Chrysler CEO Sergio Marchionne said.