It's the biggest news out of General Motors Co. since the original bailout funds were dispersed a year ago: the company formerly known as the world's largest automaker has filed an initial public offering (IPO).
As of late August, General Motors, which is currently 61 percent owned by the United States Treasury, had not released the number of shares that will be sold, nor was the price revealed in the statement that was filed with the Securities and Exchange Commission (SEC) on August 17th, but the filing did show that the car maker won't sell any of its common shares while offering preferred shares alongside the IPO, but the government will be selling some of its common stock.
Ever since GM received a $50 billion taxpayer bailout to help it recover from its June, 2009 bankruptcy, Ed Whitacre, soon to be ex-CEO, has been pushing to end the government's ownership of the company. To this end, the Detroit base automaker is, according to a reports from Bloomberg in mid-August, seeking as much as $16 billion from its IPO, to be put toward the rebuilding of its American brands which have lost market share every year for the past eight, and toward the revival of the as-yet-unprofitable European division.
Peter Sorrentino, who helps to oversee almost $13.5 billion at the Cincinnati, OH-based Huntington Asset Advisors said to the press, "It's important that they retake the legitimacy and prove that they can be a viable private company. It eliminates a reason to say no to their product."
It's worth noting that a $16 billion IPO would be the second-largest in United States history, behind the 2008 IPO of Visa, Inc., which was $19.7 billion.
When the impending GM IPO was originally announced, pundits and the public alike began speculating when it would take place. After a week-long delay of the filing, news came from two separate sources with inside information, who told Reuters that the company would begin wooing investors just after this year's midterm congressional elections on November 2nd.
In order to do that, a GM dog-and-pony show is slated to begin on November 3rd, and last two weeks. The expectation among industry experts is that the IPO will be priced on the 17th of November, and debut on the 18th, but as of September 6th, plans are still being completed and should be considered "subject to change."
On a somewhat related note, the Wall Street Journal is reporting that the U.S. Treasury Department is wary of likely political fallout, and has expressed some concerns about the number of foreign investors that should be allowed to purchase large stakes in the automaker's Initial Public Offering.
What Does this Mean for Us?
While the revitalization of a company which represents a significant number of jobs is, no doubt, a good thing, an article posted in Automotive News on the morning of September 7th talks about the impact of GM's IPO, and says that the United States government may well take a loss in the automaker's first public offering of stock, though subsequent offerings are more likely to be profitable .
Still, most experts agree that it could be years before taxpayers finally recoup the $50 billion in bailout funds that GM received last year, and that it will be at least three years before the U.S. Treasury sells down its remaining stake in General Motors after the IPO.
If the pricing for the initial GM shares follows the usual Wall Street practice of being offered below the cost to taxpayers, essentially becoming a discount purchase for new investors in the company, however, could help assuage investor concern in the current state of both the U.S. auto industry, and the American economy as a whole.
