{"id":28604,"date":"2010-08-18T21:23:03","date_gmt":"2010-08-18T21:23:03","guid":{"rendered":"http:\/\/www.thedetroitbureau.com\/?p=28604"},"modified":"2010-08-19T05:48:40","modified_gmt":"2010-08-19T05:48:40","slug":"government-motors-ready-for-its-ipo","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2010\/08\/government-motors-ready-for-its-ipo\/","title":{"rendered":"\u201cGovernment Motors\u201d Ready For Its IPO"},"content":{"rendered":"
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Why is this man smiling? Whitacre announces the GM IPO but hands the difficult work to his successor.<\/figcaption><\/figure>\n

GM is taking the first crucial step to get the government out of what critics have dubbed Government Motors.\u00a0 Just moments before the final bell rang on Wall Street, the automaker announced it had filed registration papers with the Securities and Exchange Commission.<\/p>\n

The maker plans to offer investors both common and preferred Class B shares as part of a gradual sell-off of the more than 350 million shares \u2013 equally to 60.8% of GM equity \u2013 now held by the U.S. Treasury.\u00a0 The company also plans to begin selling off the stake held by the Canadian and Ontario governments and will be listed on both the New York and Toronto Stock Exchanges following the IPO.<\/p>\n

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Breaking News!<\/figcaption><\/figure>\n

GM management has come under heavy pressure from the White House to stage the Initial Public Offering, the only way the White House can recover more than $40 billion invested by U.S. taxpayers following the maker\u2019s 2009 bankruptcy.\u00a0 But company officials had, until today, refused to lock down a specific date for the offering \u2013 which many anticipated would be staged in advance of the upcoming mid-term Congressional elections.<\/p>\n

But specific details of the IPO \u2013 including a specific date \u2013 remain in short supply.\u00a0 The automaker notably declined to say how much of the Treasury\u2019s shares will be put on the block \u2013 or at what price.\u00a0 In recent months, there has been speculation that the maker would initially offer only a fraction of the government\u2019s majority holdings, perhaps about 25%.\u00a0 But during a meeting with reporters during a conference in Traverse City, Michigan, earlier this month, GM CEO Ed Whitacre suggested taxpayers\u2019 stake might be sold off in their entirety.<\/p>\n

The initial, or strike, price also remains to be revealed.\u00a0 But to fully recover the government investment, the 358.7 million shares would have to be priced at more than $113 apiece (depending on the cost of underwriting the sale).\u00a0 That\u2019s nearly 10 times more than the current trading price of Ford Motor Co stock.<\/p>\n

The late announcement gives investors some time to think about GM\u2019s announcement.\u00a0 But initial reaction is already mixed.\u00a0 \u201cI think it\u2019s premature.\u00a0 The economy is uncertain and I think they would have been better off waiting a year,\u201d said Jim McTevia, a Detroit-based turnaround specialist.<\/p>\n

Why the announcement of the IPO has taken so long hasn\u2019t been revealed.\u00a0 Many observers had expected the news to break last week, immediately after GM announced its $1.3 billion second-quarter profit, <\/strong><\/span><\/a>a $14 billion turnaround from the same period the year before. One possible reason was working out the underwriting side.<\/p>\n

The U.S. Treasury is reportedly forcing underwriters to accept a fee of less than 1% on the GM IPO, while the standard fee for an initial public offering runs 2% to 3%.\u00a0 There have been reports that Goldman Sachs had tried to undercut its competition by cutting the fee even further, perhaps to just 0.75%, a figure that would reduce costs by tens of millions of dollars.\u00a0 But the Treasury Dept. reportedly rejected the offer even while using it as leverage with other investment banks.<\/p>\n

While the vast portion of the IPO will be used to help repay the Treasury, the sale of Class B stock will, GM said, provide cash for \u201cgeneral corporate purposes.\u201d\u00a0 In the current global economy, the automaker is worried that it not face another potential cash shortfall.<\/p>\n

Beyond getting the White House off its back, General Motors hopes to assuage critics, particularly among the Republican right wing, where some have gone so far as to call for a boycott of the carmaker\u2019s products.<\/p>\n

\u201cWe don\u2019t like the label of \u2018Government Motors,\u2019\u201d outgoing CEO Whitacre complained, earlier this month.\u00a0 \u201cIt turns customers off and it turns us off.\u201d<\/p>\n

While GM delayed the IPO filing, last week, the company did make one unexpected announcement, revealing that Whitacre will step down at the beginning of September.\u00a0 He will be replaced by board member Daniel Akerson.\u00a0 That development came as a bit of a surprise, even though the Texan had made it clear he wouldn\u2019t stay on very long.<\/p>\n

Observers say that news was designed to provide potential investors with a clear line of succession, but some observers say it also raises significant concerns \u2013 not only about Akerson\u2019s ability to lead the long-troubled company but also about how it will impact GM\u2019s turnaround efforts.\u00a0 The former telecomm executive will be the company\u2019s fourth CEO in less than two years.<\/p>\n

Joe Szczesny contributed to this report.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

GM has announced its long-awaited IPO – but still won’t say when, nor at what price or how much of the government’s stake will be sold off.<\/p>\n","protected":false},"author":2,"featured_media":24660,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[8],"tags":[],"make":[],"post-state":[],"category_old":[151],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/28604"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=28604"}],"version-history":[{"count":0,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/28604\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/24660"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=28604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=28604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=28604"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=28604"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=28604"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=28604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}