General Motors to raise price of shares for IPO
Tuesday, November 16, 2010; 12:14 AM
Government-owned General Motors has decided to raise the price of its shares in its initial public offering from a range of $26 to $29 per share to $32 to $33, according to sources familiar with the plans.
The price jump indicates that the United States, which owns 61 percent of the automaker and will be selling millions of shares in the offering, stands to recoup more of its multibillion-dollar investment in the company.
The price boost of more than 10 percent also reflects rising investor enthusiasm for the company's financial prospects, according to Steven Rattner, former chief of the government's autos task force. GM said last week it earned $4.77 billion in the first nine months of the year.
"There is definitely a greater level of confidence in the ability of the carmakers to perform," Rattner told reporters Monday at an Automotive Press Association event in Detroit. "That's because of the profit numbers."
The U.S. government has invested $50 billion directly into GM, which was restructured in bankruptcy proceedings last year.
In rescuing the automaker, the federal government received a majority ownership stake in the company, as well as preferred shares and about $6.7 billion in loans, which were repaid this year.
After the sale, which is expected to take place this week, the U.S. government's stake is expected to drop to about 35 percent.
Exactly which investors might take a significant stake in GM has become a question of increased concern to administration officials, largely because of the symbolism of a foreign entity buying up a significant chunk of the American industrial icon.
Last week, media reports indicated that Chinese automaker SAIC was preparing to buy a small equity stake in General Motors.
But in issuing guidelines for the sale in September, administration officials said they expected the GM initial public offering to be handled like any other going-public transaction.
"We expect that potential investors will be sought across multiple geographies with a focus on North American investors," according to the Treasury guidelines for the sale. "We expect that a large and diverse group of institutional investors will be offered an opportunity to participate, with no single investor or group of investors receiving a disproportionate share or unusual treatment."