GM readies market return after blockbuster IPO

Updated: 2010-11-18 21:53


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DETROIT/NEW YORK - General Motors Co prepared for a dramatic return to the stock market on Thursday with what is set to become the world's largest share offering less than a year and a half after emerging from bankruptcy.

GM readies market return after blockbuster IPO
A message welcoming General Motors is seen on the Morgan Stanley stock ticker at their world headquarters in New York Nov 17, 2010. General Motors landmark stock sale is now set to raise up to $22.7 billion, the largest initial public offering in history, allowing the US government to drastically cut the controlling stake it acquired when it rescued the iconic automaker in 2009. [Photo/Agencies]

GM shares were set to begin trading on the New York and Toronto stock exchanges, capping the first stage of a turnaround that has taken the 102-year-old automaker from near-death in 2008, via a 2009 bailout, to unlikely Wall Street flotation favorite in 2010.

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US President Barack Obama hailed what is already the biggest IPO in US history as a "major milestone" for the company's turnaround and the entire US auto industry. GM raised $20.1 billion on Wednesday after pricing the shares at $33 each -- the top of the proposed range.

The IPO values GM at about $63 billion. Including an option that would allow underwriters to sell more shares, GM looks set to raise $23.1 billion, eclipsing the record $22.1 billion raised by Agricultural Bank of China in July.

The successful sale offers a partial exit for the Obama administration after its unpopular $50-billion bailout.

The rescue left the Treasury with a 61 percent stake and the automaker with the embarrassing nickname "Government Motors."

The government part of the share sale amounts to 23.9 percent rising to a possible 27.5 percent. At $33 a share, the partial sale represents a loss of about $9 billion on taxpayers' original investment assuming the extra shares go at the same price. The GM stock price will need to rise by 47 percent to just under $49 for the US government to break even on its follow-on stock sales.

Trader Stefan de Schutter of Alpha Trading brokerage said:

"It's absolutely remarkable how the sentiment has totally changed over such a short time period ... it is evident that investor optimism surrounding the GM IPO is also pushing car stocks in Germany so that is certainly a good sign."

By 1155 GMT the Stoxx 600 European Autos Index was up 2.43 percent.

"It is seen to be a better bet with stronger and clearer financial position after its restructuring and IPO, and that will give investors confidence to hold the stocks," said William Lo, analyst at Ample Finance Group, adding: "We expect to see about 10 percent upside (on debut).".    

David Buik, senior partner at broker BGC Partners, said the indicative grey market price was $37-37.50, a gain of as much as 13.6 percent.

Even after raising the IPO price and offering size, underwriters had far more potential investment lined up than the deal could accommodate, sources said.

Sovereign wealth funds in the Middle East and Asia and other large international investors will account for less than 5 percent of the total GM offering including common and preferred shares and the overallotments, a source said.

China's SAIC Motor Corp is among shareholders, confiming on Thursday that it bought a 1 percent stake.

The reversal in sentiment toward GM pointed to renewed confidence in an industry that was pushed to the brink of collapse before unprecedented government intervention.

It also offers hope for a range of auto-related companies, including smaller automaker Chrysler, that are looking to tap the credit and equity markets in coming months, analysts said.

Sergio Marchionne, CEO of Chrysler partner Fiat said the IPO would help to understand the market's logic in terms of pricing expectations.

GM's initial valuation represents a more than 9 percent premium to Ford Motor Co -- GM's nearest rival and the only US automaker to have avoided a government bailout.

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