GM files for public stock offering
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General Motors Co. on Wednesday filed its official paperwork to sell stock to the public, the first step in its plan to pay back billions of dollars of taxpayer support that kept the company alive in the aftermath of the recession.
In a regulatory filing with the Securities and Exchange Commission, GM did not reveal how many shares would be sold or at what price range but instead detailed the risks of investing in the company and unveiled a structure for unwinding the government’s investment.
The company said it wouldn’t sell any common stock itself; all of the shares to be offered would be sold by the U.S. Treasury and, possibly, by the company’s other shareholders: the Canadian government, the United Auto Workers and GM’s former creditors.
Specifics on the number of shares to be sold and how much money the Treasury might recoup will come closer to the stock sale, expected by year end. GM and its current shareholders have to test the waters by taking the sales pitch to investors, to see what they believe the stock should be worth. The state of the stock market in general this fall, and the health of the economy, also will influence the price of the offering.
The Treasury, in a statement, said only that it would ‘retain the right, at all times, to decide whether and at what level to participate in the offering.’
The stock sale is likely to be one of the largest in history, rivaling a deal by credit card giant Visa Inc. in March 2008 that raised $17.9 billion, according to data tracker Renaissance Capital. The biggest initial public offering by any company worldwide was last month’s stock sale by Agricultural Bank of China, which was said to have raised a total of $22.1 billion.
The GM deal would repay part of the $50 billion the federal government poured into the company to keep it afloat. The bailout made the government GM’s biggest shareholder, with 60.8% of the automaker’s stock. GM exited from a bankruptcy reorganization in July 2009.
In the filing Wednesday, GM also said it plans to sell so-called preferred stock to raise new capital for the company. Details on that sale also are pending, GM said.
The preferred stock would pay a dividend. The common stock won’t pay dividends initially, GM said in the filing.
The company said it expected to have 500 million common shares outstanding after the stock deal, including shares to be sold in the offering and those retained by current shareholders. Many analysts expect the Treasury to sell its stake in pieces over a period of time rather than all at once. If the market price of the stock declines in 2011 the government would reap less of a payoff as it sells more shares.
For taxpayers to get paid back all their money, analysts estimate that GM’s new stock price has to translate into a $70 billion market value for the entire company when all the shares to be sold plus those retained by current owners are added together.
By comparison, GM archrival Ford Motor Co. has a market value of about $42 billion.
While GM sells more cars, it now is smaller in terms of sales and earnings than Ford. In the first half of this year Ford earned $4.7 billion on sales of $66.6 billion, which included results from its financing arm. By comparison GM earned $2.2 billion on sales of nearly $65 billion, the company reported last week.
GM’s annual sales reached a record high of $206 billion in 2006. The company posted a net loss of $2 billion that year.
-- Jerry Hirsch and Tom Petruno
