GM files paperwork for initial public offering

Automaker could raise up to $20 billion, nearly setting a record
CNBC: An IPO for the people?
updated 58 minutes ago

DETROIT/NEW YORK — General Motors Co filed for an initial public offering of stock on Wednesday, clearing a key hurdle toward repaying taxpayers for a controversial bailout just over a year after its bankruptcy.

The automaker said it planned to list the shares on the New York Stock Exchange and the Toronto Stock Exchange after its initial public offering.

Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Citigroup Inc have been selected as the lead underwriters for the IPO by the top U.S. automaker.

The IPO, intended to repay a portion of the automaker's U.S. government bailout, has been dubbed "Project Dawn," said a source, who declined to be named because certain details of the IPO process remained private.

GM's initial filing with U.S. securities regulators did not say how many shares would be sold or give an expected price range for what will likely be one of the biggest IPOs ever.

The automaker filed for an IPO of up to $100 million. That does not represent the full amount that GM hopes to raise, people familiar with the situation have told Reuters. GM could raise up to $20 billion in its IPO, making it one of the biggest IPOs ever, the people said.

Trading in GM shares is expected to start between late October and the U.S. Thanksgiving holiday, which is the fourth Thursday in November, according to people involved in the process. A stock offering in late October would mean trading would start just before the November congressional elections.

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Government officials and GM executives have repeatedly denied any link with the elections.

The Obama administration wants to be able to cast the $50 billion GM bailout as a financial success in the face of public skepticism and Republican political opposition.

Before its 2009 bankruptcy, GM shares traded on the New York Stock Exchange, and its return has been widely expected as the automaker begins to distance itself from its government-led restructuring and attracts private investors.

Adding a stock listing in Toronto underscores the role the governments of Canada and Ontario played as junior partners to the U.S. Treasury in keeping GM from liquidation.

GM Chief Executive Ed Whitacre, who steps down at the start of September, has said the automaker needs to distance itself from government ownership and the label "Government Motors" to build momentum in its turnaround.

"I just think that the risk of failure with the IPO is bigger than the risk of being known as Government Motors," said Brad Coulter, a restructuring specialist at O'Keefe & Associates.

Still to be determined is the number of shares to be sold by owners including the U.S. government, the governments of Canada and Ontario, and the United Auto Workers union healthcare trust.

The U.S. Treasury plans to sell about 20 percent of the 304 million GM shares it holds, reducing its stake in the top U.S. automaker to under 50 percent, sources have said.

GM does not plan to sell new common stock in the IPO but plans to issue preferred stock that would generate proceeds for the automaker. Such an offering is a less risky form of equity that could attract dividend and growth fund investors.

Although bankruptcy eliminated about $40 billion in unsecured debt and other obligations for GM, the automaker still needs funds to restructure its money-losing Opel unit in Europe and address a pension shortfall of about $26 billion.

GM has posted two consecutive quarters of profit after slashing costs and debt in bankruptcy and dropping the Pontiac, Saab, Hummer and Saturn brands.

The U.S. government currently owns almost 61 percent of GM after converting $43 billion of the $50 billion in funding to the automaker into equity.

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The total value of the GM stock offering would be critical. For U.S. taxpayers to recover the $43 billion invested in GM, the market value of the automaker would have to be near $70 billion.

Republican Senator Charles Grassley has asked a special Treasury Department watchdog for an analysis of the GM IPO and how much money would be returned to taxpayers.

The 102-year-old onetime blue chip is expected to return to the NYSE under the "GM" ticker symbol it had before the government-funded bankruptcy.

Bankers and credit analysts have offered a case for valuing GM as high as $80 billion, given projections from expected 2011 cash flow and comparisons with rival Ford Motor Co.

Ford, the only U.S. automaker to have avoided bankruptcy, has a market capitalization of just over $40 billion. Japan's Toyota Motor Corp, which tops GM in global sales, has a value of about $121 billion.

Analysts see GM as being in the early stages of a turnaround, helped by sharply lower costs, recovering sales in the United States and growth in overseas markets, led by China.

Despite the company's progress, it still faces hurdles restructuring its money-losing Opel unit, which is struggling in a slack European auto market.