GM set to go public
BY RON HAMMERTON | 19th Aug 2010
The sale is likely to be one of the biggest IPOs in corporate history, taking advantage of GM’s return to profitability with successive quarterly profits this year.
Although the exact timing and number of shares to be offered in the widely anticipated move have not been made public by GM, US reports suggest the company hopes to recoup between $US12 billion ($A13.3b) and $US16 billion before the end of the year.
GM said in a statement that the offering of common stock would come from “certain stockholders” that almost certainly include the US treasury, which owns 61 per cent of ‘New GM’ – nicknamed Government Motors – created out of the ashes of the company’s chapter 11 bankruptcy reorganisation in 2009.
Washington reports suggest the US government, facing mid-term Congressional elections in November, is looking to cut its shareholding to less than 50 per cent and generate some good economic news to aid the Democrat cause.
Other major shareholders involved in the IPO might include the Canadian and Ontario governments, union pension funds and bond holders, all of whom emerged with a stake in GM in the post-chapter 11 carve up.
A consortium of 11 of the world’s biggest banks, including several major US banks that had near-death experiences themselves in the global financial crisis, have been appointed to handle the offer.
Morgan Stanley and JP Morgan are handling initial arrangements, including the preliminary prospectus that contains a warning that, while GM expects its share of global motor vehicle market to grow from 11.9 per cent this year to 12.4 per cent by 2014, "there is no assurance that this recovery in vehicle sales will continue or spread across all our markets”.
The prospectus says risks include weak sales, under-funded pensions and the success of its restructuring efforts in Europe.
The company also said it did not intend to pay dividends on the listed stock, indicating that it still needs all the cash flow it can lay its hands on to rebuild the company with new models and a streamlined administration and sales network.
An inexperienced executive management team was also listed as a risk factor. Just last week, GM appointed former telecommunications executive Dan Akerson as chief executive, replacing stand-in CEO and chairman Ed Whitacre, himself a former telecommunications executive.
Appointed by the Obama administration to guide GM out of bankruptcy, Mr Whitacre shook up the executive ranks by appointing new blood such as GM Holden chairman and managing director Mark Reuss to the vital role of GM North America president.
The emphasis has been on shortening communication lines, quick decision making and slicing the bureaucratic red tape that weighed on the monolithic corporation.
The company has pledged to cut the fuel consumption of its cars and plug holes in its model range as it tries to reinvigorate the US public’s affection for ‘The General’.
Nineteen new models have been slated for release by 2012 under the four remaining GM ‘core’ brands – Chevrolet, Cadillac, Buick and GMC. Pontiac, Saturn and Hummer have all been terminated.
The new models will include the plug-in range-extender Volt hybrid which is expected to be launched with great fanfare around the time the shares will go on offer.
Papers for the GM IPO formally lodged with the US Securities and Exchange Commission (SEC) indicate that GM will offer preferred stock as well as common stock when the shares go on sale. Funds from the preferred stock will go back to the company for “general corporate purposes”.
The statement says the number of securities would be determined by “market conditions and other factors at the time of the offering”.
“The number of shares to be offered and the price range for the offering have not yet been determined,” the statement said.
