Ford raises $1.4 billion in stock sale; GM hits 76-year low

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Ford Motor Co. was able to sell 300 million new shares today, as it had hoped. But buyers paid a large discount to where the stock’s price was before the deal was announced, bringing Ford less cash than it might have expected.

Still, Ford’s successful stock deal stands in stark contrast to General Motors Corp.’s deteriorating financial picture. GM’s shares plunged 29 cents, or 20%, to $1.15 today, and traded at split-adjusted levels last seen in 1933. The company disclosed late Monday that six executives dumped their shares in recent days -- which the market took as a signal that GM stock has little if any value left.

Ford sold 300 million shares at $4.75 each, raising $1.4 billion, according to Bloomberg News. That was after the stock tumbled $1.07, or 18%, to $5.01 today in regular trading.

A 5% discount to the latest market price is normal in such stock sales. But in Ford’s case the discount really amounts to 22% given that the deal was announced after trading ended on Monday, when the stock closed at $6.08.

Stocks typically fall ahead of new share issuance as the market adjusts for the dilution of existing shareholders’ stakes. In Ford’s case, the 300-million-share sale boosts total outstanding shares to 3.2 billion, diluting current holders by about 10%.

The company plans to use some proceeds from the offering to fund a portion of the payments it owes to the United Auto Workers’ retiree healthcare trust.

Unlike GM and Chrysler, Ford has shunned government aid despite the crash in car sales. The company has won kudos from Wall Street for paring debt and renegotiating labor contracts on its own. Ford’s U.S. market share has been rising in recent months at the expense of GM and Chrysler.

The stock had surged from $1.58 in February to a recent high of $6.26 last week.

Brokerage UBS today raised its price target for Ford shares to $7 from $6, citing the stock sale as an encouraging sign.

Barclays Capital also raised its price target -- but just to $2 from $1. The firm said the stock sale would strengthen Ford’s balance sheet but that it was skeptical the share price could hold up at these levels, with heavy losses still expected through 2009.

-- Tom Petruno

EPA