GM’s planned public stock sale to cut U.S. stake

Article by Christian A., on August 27, 2010

Sources revealed that the public stock sale that General Motors Co. is planning is likely to end with the US government getting a minority stake while at the same time, raising new funds for the company.

These sources added that the US Treasury, which owns 60.8% of GM stock after a $50 billion bailout last year, intends to sell about 20% of its holdings as part of the stock sale.

This would result to the US government being left with a 49% stake before accounting for the further dilution from new GM share issuance.

The terms that will eventually emerge from GM's planned IPO are expected to dominate interest among potential investors and analysts. For sure, these people will be among those who will listen intently as GM's new executive team led by CEO Ed Whitacre makes its first financial presentation. 

The sources revealed also that GM is thinking about issuing new capital in the stock offering, chipping away at the one liability on its balance sheet that the government-funded restructuring was unable to address -- a $27 billion shortfall in its pension funding.

In addition, the retiree health-care trust, which is affiliated with the UAW but administered independently, means to sell part of its 17.5% stake in GM to raise cash and diversify its portfolio.

After the US Treasury, the No. 2 GM shareholder is the health-care trust. However, the sources would like to emphasize that there have no final decisions made.

There's still no update with regards to the plans for the two smaller GM shareholders. In fact, 11.7% of GM is owned by the governments of Canada and Ontario; while bondholders in the Old GM, now known as Motors Liquidation Co., possess 10%. [via autonews]

Topics: gm, ipo

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