Papers have now been filed for General Motors Company’s initial public offering. GM plans to list shares on the New York Stock Exchange and the Toronto Stock Exchange after the IPO.
The IPO is being called “Project Dawn” and is intended to repay part of the taxpayer funds used during the government’s bailout of GM last year. Lead underwriters for the IPO are Morgan Stanley, JPMorgan, Bank of America, Merrill Lynch and Citigroup Incorporated.
It’s not known exactly how many GM shares will be sold or what the expected price range is, but it is expected to be one of the largest IPO’s in history. The company filed for an IPO of up to $100 million, but that does not mean that that amount is all GM hopes to raise. People familiar with Project Dawn say that GM could raise as much as $20 billion.
Trading will start sometime between late October and Thanksgiving. If the stock is offered in late October, trading would begin right before the November congressional elections. Representatives from GM and the U.S. government deny any link between the IPO timing and the elections, even though the widely held thought is that a successful IPO would give the Obama administration and some congressional Democrats a much needed boost to their slumping approval ratings.
GM stock was traded on the NYSE before the company’s bankruptcy and restructuring, and now it hopes to distance itself from government ownership and restructuring and attract new private investors. Also, adding the stock listing in Canada underscores the roles the Canadian and Ontario governments had in partnering with the U.S. Treasury in last year’s bailout.
Restructuring specialist for O’Keefe and Associates, Brad Coulter, said, “I just think that the risk of failure with the IPO is bigger than the risk of being known as Government Motors.”
The number of shares that will be sold by the U.S., the United Auto Workers union healthcare trust, Canada and Ontario has not yet been determined. Plans are that the U.S. Treasury will sell about 20% of the 304 million GM shares it currently owns, which will reduce its ownership to less than 50%.
New common stock will not be offered by GM in the IPO, but the automaker plans to offer preferred stock that would generate proceeds for the company. This is a less risky form of equity that may be more attractive to dividend and growth fund investors.
In order for U.S. taxpayers to recover their $43 billion investment in GM, the market value of the company has to be close to $70 billion, so the total value of the GM stock offering is critical. Treasury Department oversight and analysis of the IPO and how much money is actually recovered by taxpayers have been requested by Republican Senator Charles Grassley who has been a vocal critic of the automaker in recent months.
Using projections from predicted 2011 cash flow as well as comparison to GM competitor Ford Motor Company, credit analysts and bankers have said that GM could be valued as high as $80 billion. Ford has a market capitalization of a little over $40 billion, and Toyota Motor Corporation, which beats GM in global sales, has a value of roughly $121 billion. Most analysts consider GM to be in a position to turn the company around aided by the improvement of the global market as well as lower costs and an improving U.S. economy.
For more auto industry news, please visit EveryCarListed.com.