GM files for IPO
Thursday, August 19, 2010
General Motors took the first formal steps on Wednesday to once again sell shares publicly, highlighting a remarkable turnaround for the corporate giant a year after its bankruptcy and setting the stage for Washington to withdraw from its majority ownership stake in the automaker.
The filing with regulators signals the beginning of a months-long process in which the company, revived by virtue of a $50 billion government bailout, will seek to tout its prospects to big investors, here and abroad.
The public offering of stock -- which is likely to be one of the largest in history and unfold sometime in the fall -- will allow the U.S. government to offload some of its shares, dropping its stake to below 50 percent, according to sources familiar with the offering who spoke on the condition of anonymity because they were not authorized to discuss it publicly. According to the documents, the government will also give up the power to appoint members to GM's board.
After offering a financial lifeline to the automaker last year, the government sped it through a bankruptcy reorganization and took ownership of about 61 percent of the company. How much of that rescue money may be returned depends in large part on the price that shares can fetch in the stock offering.
The company did not disclose in Wednesday's filing either the price or how many shares will be sold.
But the fact that General Motors is moving to sell shares on the market is a reflection of the renewed confidence in a company that just a year ago, staggered by debt and years of declining market share, slouched toward financial ruin.
The stakes in the stock offering are political as well as financial.
While the government rescue of GM began under the George W. Bush administration, it was the Obama administration that pumped the larger share of federal money into the automaker in exchange for a majority stake. The Obama administration also forced the company to restructure and pushed out then-chief executive G. Richard "Rick" Wagoner Jr., who is now a board member of The Washington Post Co.
Critics called the Obama administration's control of GM tantamount to socialism. But the president has touted the rescue as a measure that saved 1 million jobs and restored an important American company.
"There's the 'just say no' crowd in Washington -- they're still saying no -- who basically said, 'Well, this is a terrible investment. We should just let the market take its course, let GM, let Chrysler go bankrupt,' " Obama said on a recent trip to Michigan. "So there was a lot of skepticism out there. But we made the decision to step in."
Getting its money back?
Now, whether the government can recoup its investment will be a test for some to see if the bailout was justified.
The stock sale could emerge as a campaign issue, since it could happen sometime around the Nov. 2 elections. The company's filing was silent on the precise timing.