Monday, 29 November 2010 17:54

General Motors IPO, One of Two Largest in History, Generates $16–23 Billion

General Motors enjoyed the most substantial initial public offering the country has seen this year, generating at least $16 billion in its much anticipated IPO that launched the morning of Nov. 18.

GM chief executive officer Dan Akerson rang the opening bell of the NYSE, which, in this case, was accompanied by the sound of a 2011 Chevrolet Camaro SS engine revving and tires squealing.

GM stock began selling, and eventually the IPO would reach one of one the highest levels in history.

“General Motors returns to the NYSE as a company with a great global brand and heritage, and a renewed focus on innovation, quality and the customer,” stated Duncan Niederauer, CEO of NYSE Euronext.     “We welcome GM to the NYSE, and we are committed to providing the highest levels of market quality and service to the company’s leadership team, employees and shareholders.”

The IPO began selling on the Toronto Stock Exchange on Nov. 18, as well.

GM had priced the 478 million shares of common stock it issued at $33 per share. There were also 87 million shares of mandatory convertible junior preferred stock that totaled $4.35 billion.

GM had estimated the offering to be $20.1 billion, and if underwriters pick up their option, a total of $23.1 billion.

Shortly after the market opened Thursday, Akerson and GM vice chairman and chief financial officer Chris Liddell had a teleconference to discuss the IPO.

Liddell said the company had been speaking with several investors in the last few weeks and had really honed in on three key points. For starters, the CFO stressed to investors that GM’s profile was very low risk , regarding both cost and balance sheet.

Second, he said: “We believe we’ve got tremendous growth prospects both in mature markets, such as here in North America, but also in emerging markets, like Brazil and China.

“And third, and probably most importantly, we believe in the concept that we have talked about a lot, which is designing, building and selling the world’s best vehicles,” Liddell added.

Retail, Mutual Fund Demand
While he was not able to name any specific mutual funds that bought in, Liddell said during the call that “there was a huge amount of interest both on the retail side and the mutual funds.

“And we saw, essentially, all of the largest mutual funds over the last couple of weeks and I know—at least I think I know—that virtually all of them put orders in and I hope they certainly got an allocation,” he added.

As far as the retail side, GM saw “a very strong retail demand and we were, through the underwriters, very keen to see as much retail participation as we could,” he added.

Government Involvement
U.S. government’s share will decrease “not quite by half,” Akerson said. Looking at it on a basic basis, the government’s ownership would drop from just over 60% to 33%, Liddell explained.

Looking at it on a fully diluted basis and accounting for things like options, the government’s share falls to the 26% to 27% range, Liddell pointed out.

When asked the potential impact the reduction in the government’s ownership with have on the automaker’s image, Akerson said that considering the “excitement throughout the United States and Canada,” GM having repaid its federal government debt with interest and all the preferred shares to the U.S. government and the fact that the government’s ownership has been reduced, the public reaction would likely be positive.

“I would say that the average taxpayer in the United States would look at this particular transaction as very, very positive and we’re seeing that,” Akerson shared in the conference call Nov. 18.

“There’s no question Ford took a different path. We arrived at about the same location. We’re both viable, strong competitors with a level playing field,” he continued. “And at this stage of the game, the best car wins.

“We’re going to have to continue to prove ourselves. At the end of the day, the quality of the product, the design of the product will rule in the marketplace. And that’s where we intend to participate,” Akerson added.

Possible Debt Offering Ahead
When asked if GM would consider debt offering, Liddell said: “Over the short term, we may look to do a small debt offering simply to establish a credit benchmark. But that will be modest, at most … it will be in the context of just providing some more liquidity and moving toward, eventually, the concept of repaying all our debt.

“So, we may take some actions over the next year, but there’s nothing of any significance from a debt point of view that you’re going to see,” he added.

Reaction
Sharing her perspective, Speaker of the House Nancy Pelosi released a statement Nov. 18  that lauded the IPO, calling it a “sign of progress.”

“General Motors’ initial public offering is a sign of progress for America’s auto industry, for our nation’s workers, for our manufacturers and our long-term prosperity. In the midst of a severe recession, Congressional Democrats and President Obama took difficult emergency action to rescue American auto companies and strengthen critical pillars of our manufacturing sector, while protecting taxpayers,” the statement said.

“Today we have more evidence that those actions are paying off, and the American people are one step closer to being made whole,” Pelosi continued.

“Preserving, bolstering and expanding our manufacturing base is central to our economic growth, our national security and our competitiveness on the global stage, and key to establishing America’s manufacturers as centers of innovation.”

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