GM’s IPO may involve only U.S. Treasury’s shares

Article by Christian A., on September 26, 2010

According to sources, it’s possible that the UAW health care trust and the governments of Canada and Ontario will opt out of participating in General Motors Co.'s stock offering so that their shares won’t take a price cut.

In the event that second and third biggest shareholders decide to hold their shares through the IPO, it would mean that the Treasury would be the lone stakeholder trying to sell off its shares.

What this means ultimately is that the total value of the deal would be at the low end of market expectations. The sources added that the US Treasury, which holds 61% of GM after its $50 billion taxpayer-funded bailout, is hoping to sell at least 20% of its stake so that it would become a minority shareholder.

After GM’s restructuring in a US government directed bankruptcy in 2009, nearly 30% of its common stock ended up with the UAW's trust fund for retiree health care -- known as the VEBA -- and Canada.

The sources added that to avoid offering the large discounts expected for initial offerings, both the VEBA managers and Canadian officials have considered waiting until follow-on stock offerings.

The sources of this report declined to be identified because the preparations for the deal are private and are strictly regulated by US securities laws. Typically, IPOs are discounted 10% to 15% from theoretical fair value to entice investors to take a risk on a new issue and lead the way for future stock floats.

The sources indicated that the discount could be as high as 20% in GM's IPO. Follow-on offerings are customarily priced only 3% to 7% below market. Sources have shared previously that the original plans for the landmark IPO had anticipated that the two other major shareholders would sell the same proportion of shares as the US Treasury. [via autonews - sub. required]

Topics: gm, ipo, us treasury

If you liked the article, share on:

Comments

Login or Create new account to add a comment!

Recommended

Carmakers usually leave us thirsty for information on whether they would introduce a new, refreshed or face-lifted vehicle and on when they intend to launch it. There are reasons for...
by - February 20, 2017
Cadillac’s CT6 full-size prestige-luxury sedan is still somewhat new. It has been offered to the global auto market for two model years – 2016 and 2017. But for those who...
by - February 19, 2017
In many industries, it is the rivalries that make things exciting. In basketball for example, there is the well-known rivalry between the Los Angeles Lakers against the Boston Celtics. For...
by - February 19, 2017
Now on sale in several major markets around the world including Europe, the BMW 5 Series (G30) heralds the arrival of the new seventh generation and represents a whole new...
by - February 19, 2017
Just recently, it was speculated that a new Porsche Cayman GT4 RS is coming. There is no official confirmation yet from the German sports car maker, but the arrival of...
by - February 18, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries