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GM raises IPO size, downsizing government stake

by Jorge Hernandez on November 17, 2010

General Motors Co announced Wednesday that it will be raising its initial public offering (IPO) by 31 percent, a move that will help the automaker shed some of its dependence on the government.

After it grew to 478 million shares, GM's IPO may raise to anywhere between $15.8 and $22.7 billion, which could make it the biggest ever common stock offering in the U.S. The sale will be a definite step for GM toward raising the $49.5 billion it received in a taxpayer bailout last year, as the US Treasury stake could fall to 33 percent from 61 percent.

Canada's stake could also drop from 12 percent to 9.3 percent, and the United Auto Workers share might fall from 20 to 13 percent, according to the Wall Street Journal.

The automaker announced it would be raising the size of its IPO after a "surge of investor interest" with orders worth $70 billion for the common stock offering, reports Reuters.

Michael Yoshikami, who oversees shares at YCMNet Advisors, told BusinessWeek.com that "Treasury is confident [that] demand is there for these shares to get soaked up."

GM recently reported third quarter earnings of $2 billion, its third successive quarterly profit after five years of losses. The Journal reports that these gains came amid higher production of pickup trucks and the sale of higher-priced vehicles.

GM sales have not improved in Europe, however, and the automaker recently said it expects overall profits to come in below those of the last three quarters, reports the news source. The costs for new vehicles and forecasted higher expenses for future products may contribute to the downward trend.

A source told Businessweek that the IPO is oversubscribed and hasn't yet been priced, though the shares are likely to sell for $33.

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