By Agency reporter

Friday, 19 Nov 2010

MICHIGAN: General Motors Company, which went bankrupt last year after almost a century on the New York Stock Exchange, returns to public trading on Thursday following an initial public offering that raised more than $20bn.

Bloomberg reported on Thursday that GM‘s owners, including the United States Treasury, sold $15.8bn of common shares at $33 each on Wednesday in the second-largest US IPO on record.

According to a statement, the company‘s offering of $4.35bn of preferred shares and an overallotment option may boost the total to $23.1bn, more than the $22.1bn raised by Beijing-based Agricultural Bank of China Limited in the biggest IPO of common stock in history.

The offering from GM came 16 months after it emerged from bankruptcy and brings Chief Executive Officer, Mr. Dan Akerson, closer to his goal of returning the $49.5bn the automaker received in a taxpayer bailout last year. The Treasury, which will get as much as $13.6bn from the IPO, will have to sell its remaining GM shares at an average of about $53 each to make back its total investment, data compiled by Bloomberg show.

The IPO ”is a very encouraging sign,” said Mr. Jack Ablin, chief investment officer at Chicago-based Harris Private Bank Mr. Jack Ablin, which oversees $55bn. ”It just demonstrates the level of enthusiasm that shareholders have for the company,” he added.

GM, whose predecessor was listed on the NYSE on December 20, 1916, according to the exchange‘s website, started trading on Thursday under the ticker GM. The Detroit-based automaker will be listed on the Toronto Stock Exchange under the ticker GMM.

General Motors Corporation filed for Chapter 11 bankruptcy protection on June 1, 2009, after the failure of New York-based Lehman Brothers Holdings Incorporated in September 2008 froze credit markets and helped cause the longest recession since the Great Depression.

GM‘s owners sold 478m shares of common stock on Wednesday for $33 each in the biggest US IPO since San Francisco-based Visa Incorporated‘s $19.7bn sale in March 2008, according to data compiled by Bloomberg.

The Treasury needed to sell all of the GM shares it held at an average price of $43.67 to break even on its investment. That would require its remaining 500m shares to be sold at $53.07 each, data compiled by Bloomberg show.

”We will only get our money back if we are very patient and if GM performs very well,” said Mr. Joe Phillippi, Principal, AutoTrends Incorporated in Short Hills, New Jersey Mr. Joe Phillippi said. ”GM will really have to hit the ball out of the park in the next couple of years,” he added.

The Treasury offered about 358.5m shares in the IPO, about 95 million more shares than initially planned, and the United Auto Workers‘ retiree health-care trust sold 18 million more, according to GM‘s regulatory filings. The overallotment option increased by an additional 14.3 million shares offered by Treasury and 2.7 million by the UAW trust.

The IPO would lower the Treasury‘s stake to 37 per cent, or 33 per cent with the overallotment option, from 61 per cent, the filings showed. The UAW trust‘s holdings would drop to 14 per cent, or 13 per cent with the option, from 20 per cent.

GM‘s IPO ”is an important step in the turnaround of the company and for our work to recover taxpayer dollars and exit this investment as soon as practicable,” Treasury Secretary, Mr. Timothy Geithner said, in a statement. ”It is now widely recognised that the taxpayers‘ investment not only helped save jobs during the worst economic crisis in a generation but also gave the auto industry a solid foundation on which to build,” Geithner added.

 

Source: Punch