Michigan — November 16, 2010 at 4:03 pm

GM’s IPO bigger than expected – US Govt. recoups extra $1B+


As I’ve written about before at Daily Kos and elsewhere (HERE and HERE, e.g.), GM has had remarkable success in 2010 and their impending initial public offering (IPO) Thursday is cause for some rejoicing.

This morning we learn that GM’s share price, originally forecasted to be $26-29, will be $32-33, an increase of of about 14%. This will increase the US government’s take when they sell about a third of their stock holdings by over $1 billion. The US government currently owns about 61% of GM.

They are also increasing the size of their preferred stock offering from $3 billion to $4 billion.

From Bloomberg:

General Motors Co. plans to raise as much as $12 billion in its initial public offering after increasing the asking price by 14 percent, according to a statement today.

GM, 61 percent owned by the U.S. Treasury, is now selling 365 million shares at $32 to $33 each, it said. The IPO was already multiple times oversubscribed at the original range of $26 to $29 apiece, according to two people familiar with the deal last week.

Why the change in stock price? Frankly it’s because GM is doing quite well, thank you very much. They have trimmed the fat and demand for their vehicles is up, up, up. Because of this, demand for the shares is also up.

“There’s much more demand for the shares they’re offering,” Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. “They’ve done an extremely good job in marketing this IPO so far.”

Former “car czar” Steven Rattner is quite bullish, not only about GM but about the Big Three in general:

“Things at GM have gone as well or better than you can expect, so it’s clear now that this offering will be a huge success,” Rattner told reporters.

“It’s clear now that demand is enormous, and that the price will be higher rather than lower.” […]

“This is a new and different GM that will go forth in the public market on Wednesday, and one that has all the tools to be competitive, as I believe as well about Chrysler and Ford,” said Rattner, a former private equity manager who was an adviser to President Barack Obama on the industry bailout.

With Chrysler Group LLC also showing signs of recovery, Rattner has pared his estimate of the government’s exposure to the $82 billion auto industry bailout. “I think the government is going to get even more of its money back.”

He previously estimated the government’s potential loss at between $10 billion and $20 billion, but now believes its exposure is less than $10 billion.

For those that are curious, the reason the US Treasury is only unloading a portion of their holdings at this time, they have made this decision intentionally, a move that will likely benefit taxpayers in terms of the amount we recoup from GM.

Treasury has indicated it will hold onto most of its stake for an undetermined time to avoid flooding the market with GM shares and driving down the price.

Another socialist Obama takeover of private enterprise, the so-called “bailout” of the automotive industry, is proving to have been a brilliant solution to preventing the complete collapse of this essential manufacturing sector of our economy. When one considers what the cost of the utter failure of the domestic vehicle production industry would have been (unemployment, ripple effect throughout the economy, etc.), $10 billion is small potatoes.

Since upwards of 60% of Michiganders work in jobs that are directly or indirectly related to vehicle production, you can color us grateful. Well, at least most of us.

And then, just to put a cherry on top of an otherwise delicious ice cream sundae, the Chevy Volt has just been named Motor Trend’s Car of the Year!. Yee haw!

The Volt beat out contenders that include the Ford Fiesta, Hyundai Sonata, Lincoln MKZ hybrid, BMW 5 Series, Jaguar XJ, Infiniti M and Audi A8.

I’m just sayin’…