According to two people with knowledge about the plan, General Motors Company is preparing to sell 20% of the U.S. Treasury Department’s stake in the company through an initial public offering. The sale will reduce the federal government’s stake in GM from the current 61% to a minority ownership position of less than 50%. The sources say that no final decision on how many shares will be sold or which owners will sell them.
GM reportedly plans to file a registration statement for the public offering in August and the actual stock sale is slated to begin in November. The sale could raise between $10 billion and $15 billion depending on a number of factors including GM’s performance and the overall health of the IPO market and U.S. economy at the time of the sale.
The timing of the sale appears to be, at least in part, motivated by politics. AutoTrends Consulting president Joe Phillippi says the August filing date means GM could take the company public in time for President Barack Obama to use the sale to Democrat’s advantage in the November 2 mid-term elections.
Phillippi said, “The government wants a successful offering soon so they can say that they took the company through bankruptcy, turned it over to independent management and are taking it public. This would be part of the campaign spin.”
One of the sources familiar with GM’s plan said the automaker may also sell shares that are owned by a UAW healthcare trust and by the Canadian government.
GM spokesman Selim Bingol declined to comment on the report. Another spokesperson for the company, Renee Rashid-Merem, said GM will meet with representatives of the company’s current shareholders as well as potential investors and financial analysts on June 29. She said the financial community will also have the opportunity to review GM’s current and projected financials.
JPMorgan Chase and Company and Morgan Stanley will reportedly manage the IPO and be compensated 0.75% of the total sale proceeds, which is one quarter of the rate they would typically make for such a large stock sale. The sources said JPMorgan had requested that their payment be in the form or equity but GM rejected the request. During an interview with Bloomberg on May 17, GM’s CFO, Chris Liddell, said the federal government will likely sell its stock shares over the course of “a few year.”
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