Tuesday, November 02, 2010

Government Motors to Unload Some Stock

As of today, the US government owns 61% of GM. Later this month, after the pending stock sale, government ownership will drop to somewhat less than 50%. Big deal. The reduced ownership will maintain the government's dominant position. Our CEO-in-Chief, Obama will still hold the cards, still have the power to call all the shots and the public will continue to see GM as an agency of the government. Because it will be. And it will be an agency with plans to sell people a $41,000 electric car they do not want.

The Obama administration will have the same success it had selling electric cars as it's had staging an economic recovery. Meanwhile, to restore its potential for growth, the newly restructured GM must look for foreign markets. Mainly China. For that it must reduce domestic operations and put its limited capital into new facilities outside the US. Here, the UAW is still running the factories and there's no evidence the bankruptcy enlightened those UAW members who remain employed.

Sources: GM IPO expected to raise $10 billion; US taxpayers to reduce stake in automaker

Monday November 1, 2010

DETROIT (AP) -- The sale of General Motors stock is expected to raise about $10 billion in an initial public offering that will reduce the U.S. government's stake in the automaker below 50 percent, three people briefed on the sale said Monday.

GM common stock is expected to sell for between $26 and $29 a share when the IPO takes place around Nov. 18, according to the three people, who asked not to be identified because they are not authorized to speak on the matter. That would value the company at more than $46 billion -- roughly on par with crosstown rival Ford Motor Co.

U.S. taxpayers, who bailed out GM last year, would see their ownership stake drop from 61 percent to around 43 percent, not including any extra allotment of shares bankers could offer to satisfy strong demand, the people said.

GM has wanted to shed government control, contending that it hurts the company's sales and public image. The government will get the lion's share of the $10 billion and recoup another chunk of the cost of bailing out the automaker.

GM will not make any money from the sale of the 365 million common shares that make up the IPO. Instead, it will sell roughly $3 billion worth of preferred stock that will convert to common stock in 2013, the people said. Preferred shares pay a set dividend and are considered more like bonds. GM will use the money from the sale of preferred stock to repay loans and make pension payments.

Terms of the sale are not final because GM's board could still change them, one of the people said.

GM and its bankers will begin a "road show" to woo investors in the IPO later this week. The show, which could begin as early as Wednesday, will be aimed at hedge, pension and mutual funds, but presentations are expected for individual investors. Common shares worth roughly $2 billion would be sold to investors in the Middle East, Europe and Asia, one of the people said.

The expected price range of the IPO is higher than a forecast given by GM Chairman Ed Whitacre last month. He said each share would sell for about $20 to $25.

Bankers leading the sale are recommending that the final share price be revealed Nov. 17 and the sale take place a day later, according to the people.

Companies generally hope that shares offered in an IPO rise to the high end of the range or above it, showing strong investor appetite.

Once the IPO begins, GM shares can start trading on the New York Stock Exchange, where the company symbolized America's industrial might for more than 92 years. GM was booted off the exchange last year as financial troubles sent it into a government-funded bankruptcy.

GM is now a private company that's owned by the U.S. government, a United Auto Workers health care trust, the Canadian and Ontario governments and former GM bondholders.

The Canadian governments are expected to cut their stake from 11.7 percent to 9.6 percent, while the UAW retiree health care trust would sell less, cutting its stake from 17.5 percent to 15 percent, two of the people said.

U.S. taxpayers became GM's biggest shareholder when they gave the automaker $50 billion to survive bankruptcy restructuring and emerge as a smaller company with far less debt.

GM has either repaid or has plans to repay a total of $9.5 billion, and the government hopes to recoup its remaining $40 billion investment with the initial stock sale and several follow-up sales.

The four owners hold about 500 million shares total, and the U.S. government's stake is about 304 million.

But the total shares for sale in the IPO and subsequent stock sales will be increased through a move called a split that would give the owners three or four shares for every one they currently hold, one of the people said.

The split, which will take place before the IPO, will create roughly 1.6 billion shares of GM common stock, one of the people said.

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