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General Motors heads for record share sale GM shares jump after record public offering
(40 minutes later)
General Motors (GM) is set to raise $20.1bn (£12.6bn) through its public offering of shares, making it the largest share sale in the US to date. Shares in General Motors (GM) have risen 7% on the first day of trading following the carmaker's record public share offering.
The amount could rise to a world record $23.1bn if underwriters exercise an option to sell more shares. Shares rose to $35.53 in the first few minutes of trade in New York, having been priced at $33 by the company.
Surprisingly strong investor demand has allowed the carmaker to lift the price of the shares on offer to $33 from the $26 it had initially hoped for. GM raised $20.1bn (£12.6bn) through its offering, making it the largest share sale in the US to date.
President Obama called the sale a "major milestone" for both the company and the US car industry.
The amount raised could rise to a world record $23.1bn if underwriters exercise an option to sell more shares.
Surprisingly strong investor demand had allowed the carmaker to lift the price of the shares on offer to $33 from the $26 it had initially hoped for.
GM is returning to the market after a $50bn government bail-out.GM is returning to the market after a $50bn government bail-out.
GM will raise $20.1bn from the sale of the shares - known as common stock - with $4.35bn coming from the sale of preferred shares - which pay a fixed dividend and do not have voting rights.
An over-allotment option, which will be settled over the next 30 days, would add $3bn to that figure, taking GM beyond the $22.1bn raised by the Agricultural Bank of China's market launch.
The share sale, known as an initial public offering (IPO), will allow the US government reduce its current 61% stake in the company to as low as 33%.
In the share offering, the government stands to make $13.6bn if it sells 412 million shares, as planned, for $33 apiece.
For the taxpayer to avoid a loss, it would have to sell its remaining shares - about 500 million - at about $53 a share over the next two to three years.
The company's return to the stock exchange follows recent bankruptcy and delisting from the market.
'Historic milestone''Historic milestone'
The new price values the company at about $63bn, just shy of the $66bn valuation that would represent a zero loss to the US Treasury on its rescue takeover of the company. The carmaker has raised $20.1bn from the sale of the shares. However, an over-allotment option, which will be settled over the next 30 days, would add $3bn to that figure, taking GM beyond the $22.1bn raised by the Agricultural Bank of China's market launch.
The share sale, known as an initial public offering (IPO), will allow the US government reduce its current 61% stake in the company to as low as 33%.
GM's vice chairman and chief financial officer, Chris Liddell, said: "As we prepare to enter the equity markets, all of us at GM are excited about this historic milestone. We are especially appreciative of those who stood by us through the toughest times."GM's vice chairman and chief financial officer, Chris Liddell, said: "As we prepare to enter the equity markets, all of us at GM are excited about this historic milestone. We are especially appreciative of those who stood by us through the toughest times."
GM returned to profit during the current year for the first time since 2004. The company made $5bn during the first nine months of this year. GM returned to profit this year for the first time since 2004. The company made $5bn during the first nine months of this year.
Scott Painter from the US car comparison site Truecar.com believes the IPO is a sign of how well the economic recovery is going.Scott Painter from the US car comparison site Truecar.com believes the IPO is a sign of how well the economic recovery is going.
"I think GM having a strong IPO and pricing it at the high end of the range certainly speaks well of America and confidence in America, and GM is a really good indicator of everything that we've been through over the last couple of years and how the recovery is working out," he said."I think GM having a strong IPO and pricing it at the high end of the range certainly speaks well of America and confidence in America, and GM is a really good indicator of everything that we've been through over the last couple of years and how the recovery is working out," he said.
Investors in the company are expected to include several Middle Eastern sovereign wealth funds courted by GM executives during the marketing period.
Another possible buyer is GM's Chinese state-owned partner, SAIC Motor Corp, although it is unclear whether Beijing has given the company permission to participate.