General Motors (GM) started trading at $35 on the New York Stock Exchange this morning, after an initial stock offering of $33 per share. The Wall Street Journal has more on GM’s unique situation:
Unlike private company IPOs, where owners are often willing to sell at a deeper discount to ensure a good first-day jump, the U.S. Treasury, the biggest owner of GM, was on a mission to get the maximum amount possible for its investment, which was financed with taxpayer dollars. There was concern that politicians and Wall Street would be roasted for leaving money on the table if the stock soared too high.
one of the money from the common-stock sale will flow to auto maker. The majority of the shares—358 million, or 412 million with an overallotment option—came from the U.S. Treasury, which took a controlling stake in the company as part of a taxpayer-financed bailout last year.
Through the sale, Treasury reduced its stake to 37% from 66%, and could go as low as 26% if the overallotment and warrants are exercised. It expects to further cut its ownership in future follow-on sales. Any future sales are subject to a lock-up delay of several months.
GM’s total common stock sale could hit $18.1 billion if underwriters sell extra shares in an overallotment, according to the Journal. That would make it the second-biggest American IPO in history, the newspaper says.
GM’s shrinking market share, modest profit gains, looming pension expenses, and lack of effective internal financial reporting controls make it too risky, writes Dow Jones’ David Weidner, who compares the current GM hype to excitement over a new-car smell, but without the warranty.
That same hype is excellent for the government, which hopes to recoup its losses and prove that its bailout of GM was the right decision. The government saved nearly 1.4 million jobs by bailing out GM, according to the New York Times. A successful stock offering would be one of the Obama administration’s biggest economic successes. For the sake of taxpayers, let’s hope the GM IPO isn’t all speculation.