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GM Stock Sale in High Gear: General Motors is welcomed on the stock ticker Morgan Stanley in New York on Wednesday.
General Motors Co. is on track to sell $ 18.1 billion in shares it will probably be the second largest U.S. IPO ever, capping a remarkable turnaround from two years in which the automaker has gone from begging for a bailout from the government to its stable earnings announcement first in over six years.
GM sold nearly 478 million shares Wednesday at $ 33 each, a price higher than the company and its bankers thought possible a few days ago. An additional 71.7 million shares are to be sold by GM's bankers as part of an "allotment" enabled, when sales were stronger than expected. And it sold $ 4.35 billion in preferred shares.
Wednesday afternoon at the Manhattan headquarters of one of the lead bankers, Morgan Stanley, GM executives have been welcomed by traders and bankers standing and cheering while wearing blue T-shirts GM their shirts and ties.
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Purchasers of shares included GM's pension and hedge fund giant and the GM plant workers and retirees. Among the foreign buyers will be the largest Chinese manufacturer of cars, SAIC Motor Corp., which is the largest partner in the GM global automotive market. SAIC will buy for about 500 million shares for a stake of GM's nearly 1%, people familiar with the matter said.
The proceeds will help repay the U.S. government for $ 49500000000 happened on his controversial rescue of GM, which went from losing billions of dollars per year to $ 4.07 billion so far in 2010. The Detroit company, after eliminating half of its eight brands, reducing its debt and trimming its work force in bankruptcy, has been gaining market share in the United States with strong sellers such as Equinox Chevrolet and Buick LaCrosse, after years of seeing customers overseas rivals slip base.
The U.S. Treasury will reduce its stake in GM to about 26% from 61% by selling shares, including overallotments. This could facilitate the "Government Motors' taste that has disabled some car buyers and potential investors GM.
It will take more than the IPO to regain consumers shunned GM because of his bankruptcy and rescue, "said Jessica Caldwell, senior analyst at auto website Edmunds.com-shopping. "The only thing that will really do the trick is time," she said.
A major test for the recovery of the company and success of the government's strategy of selling so many units at once, come Thursday, when GM's share of trade for the first time since entering the reorganization of the Bankruptcy June 1, 2009.
Investors and analysts to monitor the size of the first day "pop" of an IPO. If the shares rise more than the usual 10% to 20%, some observers may say GM and the United States charged too little money and left on the table. If the shares weaken, this means that some investors still doubt the future of GM.
The government needs to GM shares rise sharply in coming years to be repaid in full. While the U.S. has agreed not to sell additional shares of six months, after which it should gradually unload its remaining stake.
With the sale of Wednesday, including the allotment, the Treasury has lost about $ 4.5 billion GM has gained share at a cash cost of $ 43.84 each. The Treasury is expected to harvest 26.4 billion, an average of $ 52.79 per share on its remaining in equilibrium.
If the insurers of GM exercise all their options to sell additional shares, IPO GM's $ 18.1 billion in common shares would be the second largest IPO of Visa USA after 19.7 billion dollars sales in 2008. Adding to a projected $ 5 billion of preferred shares sold, including an over-allocation, GM would take the total to $ 23.1 billion. That would top the largest ever share sale non-IPO to U.S. $ 21.1 billion from Citigroup Inc. in December 2009, which was also linked to a government bailout.
Dennis Berman and Simon Constable discuss how subscribers GM achieved a high price for the opening of IPO GM, an effort that will return billions of dollars of taxpayer money to bail out the U.S. Treasury.
The sale marked the biggest step toward GM cutting its ties with the United States government. The Treasury has not driven decisions on GM's operations or strategy of the company since emerged from bankruptcy last year, people familiar with the situation said. But the government has closely followed the company.
For over a year, GM executives, including its officers, briefed administration officials about every two weeks. These meetings will continue, but occur less frequently, people familiar with the matter said.
Treasury Secretary Timothy Geithner and President Barack Obama's top economic adviser, Lawrence Summers, also reducing their control, these people said. Messrs. Geithner and Summers were often called upon to approve the recommendations by the force of the automatic administration working on issues such as choice of banks to underwrite the IPO GM, these people said.
Some U.S. restrictions put in place under the rescue plan remains, including limits on executive compensation that have hindered GM said its ability to attract top talent. Such restrictions and government oversight have grated on GM Chairman Edward E. Whitacre Jr., who was CEO until September.
Last summer, Mr. Whitacre has said publicly that he wanted the Government to sell its all as quickly as possible. He had originally planned to resign after the IPO, but he resigned unexpectedly as chief executive in August to allow GM to introduce his successor, Daniel Akerson, investors like the leader who will lead the company through the IPO and beyond.
Mr. Whitacre's frustration over the management of a company controlled by the government was a factor in his choice to resign, people familiar with the matter said. The Treasury has not ruled out the decisions of Mr. Whitacre did, these people said, but the two clashed at times. Mr. Whitacre, for example, Treasury officials thwarted by giving them only one day's notice that GM was buying a company car-loans. Mr Whitacre declined to comment through a spokesperson for the company.
Mr. Akerson, however, adopted a much more conciliatory with the government, but he also said GM will be better when the government sells its stake.
"GM is run like a corporation in America," he said recently. "We have just a big shareholder who has a keen interest in what we do."
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