GM Set To Raise More Than $60 Billion In IPO
Brett EmisonNovember 14, 2010 12:01 PM
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Following news last week of GM's $2 billion 3Q profit -- the automaker's most profitable quarter in six years, we've learned that GM's initial public offering will raise more than $60 billion for the company.
General Motors Co.'s landmark initial public offering has already garnered $60 billion in orders, a clear sign of healthy investor interest for the massive automaker that was in desperate straits just over a year ago. The robust demand for shares in GM, which filed for bankruptcy in June 2009, is six times the amount it had planned to raise.
- Investors display voracious appetite for GM shares, Clare Baldwin and Soyoung Kim at Reuters via MSNBC.com
According to a Wall Street Journal report, analysts expect GM shares to open between $26 and $29 per share. Investors may see shares jump 10% on the opening day for the new stock.
According to the Reuters report, GM is still accepting orders for shares in the IPO ad is not expected to close its books until sometime this week. The US Treasury will remain the largest shareholder following the IPO with plans to divest shares over time so as to oversaturate the market. Other large shareholders include the governments of Canada and Ontario as well as the UAW VEBA healthcare trust.
GM's IPO is set to price on Wednesday with trading to being Thursday morning. However, some are concerned that average investors may be shut out of the GM IPO.
GM's strong financial outlook comes even after it assumed liability for injuries and deaths caused by defective vehicles manufactured or sold before the "new" company exited bankruptcy. GM's decision to stand behind its vehicles ensures that those injured by vehicle defects will have a means of recovery and the costs of those injuries will be borne by the company rather than shifted to taxpayers through Medicare and Medicaid programs.
Left out, however, are those who were injured or killed by defective GM vehicles before the company exited bankruptcy. Those with pending claims -- even if they had already received a verdict -- and those newly injured before GM exited bankruptcy have been left out and treated as unsecured creditors and are expected to receive little or nothing, even as GM is set to raise more than $60 billion from this IPO. These people -- now twice victimized -- are part of an unreported "auto bailout" in which taxpayers will pay for GM's product defect liability through Medicare, Medicaid and Social Security. The "new" GM should have accepted liability for all of its vehicles and not lumped these victims in with other unsecured creditors.
Consumer advocates have lobbied for a delay in GM's IPO. According to the Detroit News, a letter to President Obama calling for a delay was signed by Ralph Nader, Public Citizen president Robert Weissman, Center for Auto Safety executive director Clarence Ditlow and former Public Citizen President (and former NHTSA chief) Joan Claybrook. They offered a number of reasons to postpone the IPO, including worries that the government will incur a significant loss on the first sale of stock and GM's continued lobbying against higher fuel efficiency standards and comprehensive auto safety legislation.
"It's the same old arrogant GM," Nader said in an interview. "There's no sense of gratitude that they wouldn't exist without the government, without the taxpayers."
It is unlikely that the groups letter will delay GM's initial public offering.
Not only are investors geared up for GM's IPO, but investors also appear bullish on Chrysler as well. Chrysler is expected to launch its own IPO during the second half of 2011.
[More information on the GM and Chrysler bankruptcies]
(c) Copyright 2010 Brett A. Emison