General Motors Co.’s initial public offering may raise $15.8 billion after the U.S. Treasury and United Auto Workers’ retiree health-care trust increased the shares they are selling, according to a regulatory filing.
The IPO was expanded by 31 percent to 478 million shares, GM said today in a filing with the Securities and Exchange Commission, a day after boosting the offer price to as much as $33 a share. An overallotment and an offering of preferred shares may increase the total amount raised to about $22.7 billion. Agricultural Bank of China Ltd.’s $22.1 billion initial sale is the largest common-stock IPO in history.
The initial sale, scheduled for today, will bring Chief Executive Officer Dan Akerson closer to his goal of returning the $49.5 billion GM received in a taxpayer bailout last year. The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb at least 60 percent, Bloomberg data shows.
“Treasury is confident demand is there for these shares to get soaked up,” said Michael Yoshikami, who oversees $1 billion at YCMNet Advisors in Walnut Creek, California. “It makes a lot of sense for them to do this because we’re already talking about shares going out at a price that is far above what everybody thought would be in demand.”
The offering would be the second-largest common-stock IPO in U.S. history, after Visa Inc.’s $19.7 billion sale in March 2008, Bloomberg data shows. With the overallotment option or so- called greenshoe, GM may sell almost 550 million common shares and raise about $18.1 billion.
Noreen Pratscher, a GM spokeswoman, and Eric Henry, chief investment officer for the UAW trust, didn’t return telephone messages seeking comment yesterday. A Treasury spokesman, Mark Paustenbach, declined to comment.
GM’s underwriters stopped taking orders for the IPO yesterday, which was more than seven times oversubscribed, according to a person familiar with the deal.
“Even with high demand, they can’t go too high in terms of the price, and that’s why they’re offering more shares,” said Alan Baum, principal at Baum & Associates, an automotive market research firm in West Bloomfield, Michigan.
While the IPO hasn’t been priced yet, the shares will probably sell for closer to $33, said one person familiar with the plans, who declined to be identified because the discussions are private.
The Treasury will offer about 95 million more shares than initially planned, and the UAW trust will sell 18 million more, today’s filing shows. The overallotment option will increase by an additional 14.3 million shares offered by Treasury and 2.7 million by the UAW trust.
The offering would lower Treasury’s stake to 37 percent, or 33 percent with the overallotment option, from 61 percent, the filing shows. The UAW trust’s holdings would drop to 14 percent, or 13 percent with the option, from 20 percent.
The Treasury needs to sell GM stock for an average of $43.67 a share to break even on its entire investment, data compiled by Bloomberg show.
“We will only get our money back if we are very patient and if GM performs very well,” said Joe Phillippi, principal of consulting firm AutoTrends Inc. in Short Hills, New Jersey. “GM will really have to hit the ball out of the park in the next couple of years.”
At $33 a share, GM is valued at 7.8 times this year’s earnings, based on its net income in the first nine months of 2010. Dearborn, Michigan-based Ford Motor Co. trades at 8 times analysts’ estimates for 2010 profit, the data show. Ford has been the world’s most profitable automaker this year through September.
GM, which lost $82 billion from 2005 to 2008, was valued at an average of 10.3 times profit from 2000 through 2004, monthly data compiled by Bloomberg show. Ford traded at an average of 13 times earnings in the same period.
GM reported third-quarter net income of $2.16 billion last week, bringing its earnings this year to $4.77 billion. While GM will have positive earnings before interest and taxes in the fourth quarter, they will be “significantly lower” than the first three quarters of the year, Akerson said on a Nov. 10 conference call.
The automaker is selling shares after the Standard & Poor’s 500 Index rose to a two-year high this month on speculation that the U.S. economy won’t slip back into a recession. The benchmark gauge for U.S. equities fell for the fourth straight day yesterday, the longest losing streak since August.
The Kuwait Investment Authority may buy a stake in GM of 1 percent or less, one person familiar with the deal said yesterday. Shanghai-based SAIC Motor Corp., GM’s partner in China, probably will be among the buyers, three people familiar with the plans said last week.
Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. are leading the IPO that includes 35 underwriters, according to a GM filing with the Securities and Exchange Commission. Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc. and Royal Bank of Canada are also listed in the prospectus.
General Motors Corp. filed for Chapter 11 bankruptcy protection on June 1, 2009, after the failure of New York-based Lehman Brothers Holdings Inc. in September 2008 froze credit markets and helped cause the longest recession since the Great Depression.
GM’s common shares will be listed on the New York Stock Exchange under the ticker GM and on the Toronto Stock Exchange under the ticker GMM, the SEC filing showed.
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