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GM Says Total Offering Size $23.1 Billion Including Overallotment Options

November 27, 2010
3 min to read



General Motors Co. said the total value of common and preferred stock sold in its initial public offering reached $23.1 billion after underwriters exercised an option to purchase more shares, reported Bloomberg.


The banks bought an additional 71.7 million common shares at $33 each for $2.37 billion and 13 million more preferred shares for $650 million, GM said in a statement yesterday. The amount of common and preferred shares sold was more than the $22.1 billion raised by Beijing-based Agricultural Bank of China Ltd. this year in the biggest IPO of common stock in history.

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The underwriter’s purchase increases the amount of stock sold by the U.S. Treasury in the IPO to $13.6 billion, bringing Chief Executive Officer Dan Akerson closer to his goal of returning the $49.5 billion the automaker received in a taxpayer bailout. Detroit-based GM’s shares have climbed 2.4 percent since the company originally raised $20.1 billion on Nov. 17.


“There is a lot of demand right now for the automakers,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages about $1.6 billion. “The stock has held up very well,” since GM began trading, he said.


Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. led the GM IPO, an offering that included 35 underwriters, according to filings with the Securities and Exchange Commission.


GM’s Shares


The automaker’s shares rose 32 cents, or 1 percent, to $33.80 yesterday in New York Stock Exchange composite trading.

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GM’s owners, including the U.S. Treasury, the United Auto Workers’ retiree health-care trust, Canada and Ontario sold 478 million shares of common stock on Nov. 17 for $33 each.


The overallotment option brings the total amount of common shares sold to $18.1 billion, the second-largest in U.S. history behind San Francisco-based Visa Inc.’s $19.7 billion IPO in March 2008, data compiled by Bloomberg show. Agricultural Bank of China’s initial offering raised a combined $22.1 billion in Shanghai and Hong Kong last quarter.


The overallotment option lowered the Treasury’s stake in GM to 33 percent from 37 percent, according to SEC filings. The government held a 61 percent stake before the IPO.


The UAW trust’s holdings dropped to 13 percent with the option from 14 percent, filings show. It had a 20 percent stake in GM before the IPO.


Lehman’s Collapse

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


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 500 million shares to be sold at $53.07 each, 57 percent higher than yesterday’s closing price.


GM reported third-quarter net income of $2.16 billion this month, bringing its earnings this year to $4.77 billion. While the company will have positive earnings before interest and taxes in the fourth quarter, they will be “significantly lower” than the first three quarters of the year, Akerson said on a Nov. 10 conference call.


The automaker sold shares after the Standard & Poor’s 500 Index rose to a two-year high this month on speculation the U.S. economy won’t slip back into a recession. The benchmark gauge for U.S. equities slipped for the third time in four days yesterday amid mounting concern about Europe’s debt crisis and increasing tensions in Korea.


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