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GM's Sticker: $50 Billion

November 2, 2010
2 min to read



The United States will cut its ownership stake in General Motors Co. below the symbolically important 50 percent to about 35 percent when the carmaker relists its stock later this month, according to new figures the company plans to disclose Tuesday, but it will be tough for the government to break even on its investment, reported The Wall Street Journal.


The new projections by GM say the company could have a stock-market value at the start of trading of $50 billion—about the same as the solidly profitable Ford Motor Co.—and that it could be as high as $60 billion, said people familiar with the plan.

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But for the U.S. to break even through sales of the rest of its stake, the share price may need to rise more than 60% from its initial level, to about $50.


The initial public offering plan envisions the shares would be priced at $26 to $29 each, these people said. The actual price of the stock to be sold in the IPO would be set about Nov. 17, and the sale would take place the following day.


Through the IPO, GM plans to sell 24% of its total shares, or about $10 billion worth, based on the midrange of the share-price estimate.


The shares to be sold are owned by the U.S. Treasury, a union-run trust and Canadian federal and provincial governments, said the people familiar with the plan.


Under the plan, the Treasury would sell $7 billion of its shares, paring its 61 percent stake to about 35 percent—lower than many observers expected. The United Auto Workers trust, which pays for retiree health care, would sell $2 billion of its shares, while Canada and Ontario would offload around $1 billion of their shares.

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The plan includes a stock split that will triple the number of GM common shares available to 1.5 billion. Outstanding warrants—the right to buy shares— boost the total to 1.8 billion.


Details of the stock offering are expected to be filed with the Securities and Exchange Commission on Tuesday, in advance of a "road show" GM is set to launch Wednesday to promote the IPO to prospective investors.


Some details of the sale were earlier reported by Reuters.


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