Many companies are abuzz about what is being touted as the second-largest initial public offering in US history. It is believed that Wall Street bankers will be forced to charge the lowest fees in at least a decade for Treasury's sale of General Motors Co.
Competing to lead GM's share sale are the following companies: Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley.
Independent International Investment Research plc estimates that up to $12 billion could be raised.
Finance professors at Cornell University and Georgetown University say that the US government may seek underwriting fees of as low as 2%. Bloomberg data indicate that this is less than any US IPO over $5 billion since 1999.
The professors explained that the Treasury, which owns a 61% stake in GM, will urge the banks to accept fees that may be less than half the 5.5% average for all IPOs in the past decade after using up $150 billion in taxpayer money on the same financial firms during the credit crisis.
Bloomberg data also show that the underwriters would generate up to $360 million in an initial offering of GM based on the average 3% fee for previous deals that are more than $5 billion.
Roni Michaely, a finance professor at the Johnson Graduate School of Management at Cornell in Ithaca, N.Y., said that this prospect of pouring in hundreds of millions into the banks is "the last thing they need."