It was thirteen months ago that the U.S. government rescued General Motors from bankruptcy and landed up owning around 61 percent of the company in return for financial assistance to the tune of $50 billion. And now, despite the weak IPO market and a less than inspiring track record, GM is set to offer shares to the public once again in an effort to pay off their debt and reclaim full ownership of a company that was once part of the portfolio of many serious investors. But opinion is divided as to whether they will be able to rise to those prominent levels again, with the most obvious question being whether investors will give the automaker another chance.
General Motors filed the required S-1 with regulators late Wednesday 18 August. The 700-page documents addresses the reasons for the IPO, along with potential risks that would-be investors need to consider. The public announcement did not reveal the number of shares that would be offered, nor when this would take place, although it’s speculated that it may be as soon as October.
GM’s CEO Ed Whitacre has been reported as saying that government ownership has had a detrimental effect on the company’s image, which has been reflected in disappointing sales. It is anticipated that reducing the stake the government has in GM, will go some way to restoring that tarnished image to its former status. But investors are reminded that, while the government’s stake in the company will be reduced if the IPO is successful, it will still own a considerable portion of GM.
In the weeks ahead, more information regarding the General Motors IPO as the balance of the required paperwork is filed. It has been revealed, however, that GM stakeholders will be selling common stock, with the company selling preferred shares which carry dividend payments. What the demand will be for these shares is anyone’s guess, but an amount of $20 billion for the IPO is being bandied about. Plans in the pipeline, which include the introduction of up to 20 vehicles to consumers in Brazil and China within the next two years, reveal that the company is moving forward determinedly, which may be incentive enough for investors to jump on board.
