Banks buy $2.37 billion more in GM shares
Friday, November 26, 2010; 6:21 PM
General Motors inched further forward in its effort to repay taxpayers, announcing Friday that the banks backing its historic initial public offering had exercised their right to buy an additional block of shares in the restructured automaker.
The banks' move expanded the auto giant's IPO by 15 percent to $23.1 billion, making it the largest in global history and bringing the company about $2 billion closer to returning the $49.5 billion spent on its bailout.
GM reclaimed its old stock ticker with fanfare last Thursday after weeks of anticipation on Wall Street. The company could barely keep up with demand for the newly issued stock as investors clamored for a piece of the American icon. In response, during the week of the IPO, GM said it was expanding its offering by 31 percent.
As part of the deal, the banks underwriting GM's IPO also had the option of buying about $3 billion in additional stock - in case investors remained hungry.
GM confirmed Friday that the banks had exercised that right, buying an additional 71.7 million common shares, worth $2.37 billion, and 13 million preferred shares, totaling $650 million. The company said the closing on the sale of these added shares will take place Dec. 2.
The government still owns about one-third of GM. The stock price needs to hit around $50 a share for taxpayers to break even. GM debuted at $33 a share, and on Friday, in a holiday-shortened trading session, the stock closed at $33.80.
It remains unclear whether taxpayers will recover all of their investment in the company, but Friday's announcement means the U.S. government has moved closer to that goal.
Here's the math: Before the IPO, the government had recovered about $9.5 billion from GM, bringing the company's balance owed to $40 billion.
Last week, the government sold $11.8 billion of common stock, leaving GM still owing the government $28.2 billion.
Greg Martin, a spokesperson for the company, said money from any additional common stock sales would go straight to the Treasury. And so the underwriters' expansion of GM's IPO would bring the latest amount owed to taxpayers down to $25.83 billion.
After years of dismal results, GM has been delivering some good news lately. It's reported three straight quarters of profits. And executives are hopeful that the Chevy Volt, which is expected to go on sale this month, will give the company a foothold in the market for fuel-efficient cars.
The company is also trying to rehabilitate its image. It unveiled a Thanksgiving Day commercial showing images of pop culture icons struggling and then landing on their feet, including John Belushi in the movie "Animal House,'' shouting, "Not me! I'm not going to take this." The ad concludes with: "We all fall down. Thank you for helping us get back up."