GM Reduces Size Of IPO To $8-10 Billion As Investor Euphoria Evaporates

Tyler Durden's picture

For now it is merely a reduction in the IPO size. Next it will be postponement due to "market conditions." And as a reminder Government Motors owes taxpayers $49.5 billion. "GM shares must be sold at about $133.78, before splits, if the U.S. is to recoup its investment, Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said in a letter, the Wall Street Journal reported today." Good luck with that, especially once the SEC announces HFT operations need to be curbed, if not pronounced outright illegal, in under 10 days.

More from Bloomberg:

Sept. 23 (Bloomberg) -- General Motors Co. will probably seek to raise $8 billion to $10 billion in an initial public offering in November, a smaller sale than the automaker originally targeted, said two people familiar with the matter.

The U.S. Treasury Department, which owns 61 percent of GM, is more interested in fetching a higher share price to eventually recoup its $49.5 billion investment than in cashing out a bigger portion of its position, said the people who asked not to be identified because the discussions are private.

A larger deal at a lower price would place more pressure on the government to win higher prices in future offerings, the people said. GM and its investment banks have been considering a deal as large as $16 billion, people familiar with the plans said in August.

“They’re taking a more sober view,” said Joe Phillippi, principal of AutoTrends Inc., a consulting firm in Short Hills, New Jersey. “The real question is what’s the price? There are questions in people’s minds about the market and the world’s economies.”

Chairman Ed Whitacre, who handed CEO duties to Dan Akerson on Sept. 1, had favored an IPO that would sell as much of the government’s position as possible, the people said. GM’s banks also sought a larger deal because it would generate higher fees.

Noreen Pratscher, a spokeswoman for Detroit-based GM, declined to comment.

                       Government Position

The department could offer as little as $6 billion in shares, though that is unlikely because the government and GM want investors to have more shares available for trading, the people said. Later offerings will be used to sell bigger portions of the government’s position, the people said.

GM will split the stock to a price around $20 a share as is routine in many IPOs, one of the people said.

China’s SAIC Motor Corp., which runs a joint venture with GM in Shanghai, is likely to buy a stake of 1 percent or less, the two people said.

SAIC would buy the shares to show support and firm up ties with GM. The Treasury Department wouldn’t be willing to sell the company more shares, the people said.

GM shares must be sold at about $133.78, before splits, if the U.S. is to recoup its investment, Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said in a letter, the Wall Street Journal reported today.

Including dividends and interest GM already has paid the government, the stock must sell for $131 before splitting for the U.S. to break even, a person familiar with the situation said.