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GM raises $20 billion in IPO

Sell, sell: General Motors CEO Dan Akerson on the trading floor at the New York Stock Exchange.

GM’s share float raises $20 billion-plus as Obama prepares to halve taxpayers’ stake

19 Nov 2010

JUST 16 months after exiting chapter 11 bankruptcy with a $US50 billion federal government bailout, a restructured and rejuvenated General Motors made a strong return to the public share market on November 18 with an initial public offering (IPO) that generated more than $US20 billion.

Some 450 million shares were traded on the New York Stock Exchange on its first day, with the share price closing at $US34.19 – up 3.6 per cent on the $33 IPO after trading started at $35 and reached a peak of almost $36 within 30 minutes.

The successful share float, which had a positive effect on the Dow Jones industrial average (up 173 points on Thursday), now values the auto giant at about $US63 billion and will enable the US government to reduce its shareholding in the company dubbed ‘Government Motors’ from 61 per cent to as low as 33 per cent.

 center imageFrom top: GM executives including Mark Reuss (far left), Dan Akerson (centre) and Stephen Girsky (far right), GM CEO Dan Akerson inside the NYSE, GM products outside the NYSE, President Barack Obama at GM's Volt battery plant in Michigan.

It follows a massive overhaul of General Motors over the past year and a half, during which time it has slashed costs, completely reconfigured its senior management team and either sold or discontinued four of its eight brands – Pontiac, Saturn, Saab and Hummer.

“All of us at GM are excited about this historic milestone,” said GM vice-chairman and CFO Chris Liddell.

“We are especially appreciative of those who stood by us through the toughest times, and we are dedicated to creating value for all of our stakeholders.”

US president Barack Obama said: “General Motors’ initial public offering marks a major milestone in the turnaround of not just an iconic company but the entire American auto industry.

“Through the IPO, the government will cut its stake in GM by nearly half, continuing our disciplined commitment to exit this investment while protecting the American taxpayer.

“Supporting the American auto industry required tough decisions and shared sacrifices, but it helped save jobs, rescue an industry at the heart of America’s manufacturing sector, and make it more competitive for the future.”

The issue included 478 million shares of common stock, for a total of $15.77 billion, and 87 million shares of mandatory convertible junior preferred stock, for a total of $4.35 billion.

The company said underwriters have a 30-day option to purchase up to 71.7 million additional shares of common stock from the selling stockholders, for a total of $2.37 billion.

An additional 13 million shares of mandatory convertible junior preferred stock can also be bought from the company on the same terms and conditions, for a total of $650 million, to cover any over-allotments.

Former Holden chairman and now GM North America president Mark Reuss told the Reuters news agency: “It’s a big day to become a public company again, but we have got to just hit the ball out of the park here every day on product.”

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