5:26 AM
GM has orders for $60 billion in stock: sources
Addison Ray
By Clare Baldwin and Soyoung Kim
NEW YORK | Fri Nov 12, 2010 7:02pm EST
NEW YORK (Reuters) - General Motors Co's landmark initial public offering has already garnered $60 billion in orders, six times the amount it had planned to raise, in a sign of healthy investor interest for the massive automaker that was in desperate straits just over a year ago.
The robust demand for shares of GM, the American industrial icon which filed for bankruptcy in June 2009, underscores growing investor confidence the auto industry has come through the punishing downturn of the past two years with sharply lower costs and higher profit potential.
GM's IPO is expected to price on Wednesday. The shares are expected to start trading on the New York and Toronto stock exchanges on Thursday.
The landmark IPO will likely price around the top end of the $26 to $29 per share range and the full overallotment option -- additional shares underwriters can sell to help stabilize the stock after it begins trading -- will likely be exercised, three people familiar with the matter said.
There is also "excess demand" for the $3 billion worth of preferred shares GM plans to sell, the sources said.
The strong response also bodes well for upcoming initial public offerings by other auto industry companies that restructured in bankruptcy, such as Chrysler and auto parts suppliers Delphi and Visteon, analysts said.
Just over a year after a politically unpopular $50 billion bailout that left the U.S. Treasury with a 61 percent stake, GM filed to sell about $10 billion worth of common stock and $3 billion of preferred shares. Such an offering would mark the second-biggest U.S. IPO ever after Visa Inc and one of the largest, globally.
The full overallotment could take the total IPO amount to as much as $15.65 billion. It would also cut the U.S. Treasury's stake to just over 40 percent.
Pricing at the top end of the range and based on a diluted share count of roughly 1.9 billion, GM would have a market value of just over $55 billion, roughly on par with smaller rival Ford Motor Co
For U.S. taxpayers to break even, GM needs a market value of roughly $70 billion.
GM is still accepting investor orders for shares in the IPO and is not expected to close the order books until early next week, the sources said. The sources did not have permission to speak publicly and declined to be named.
"There's already a tremendous amount of interest because (GM) restructured themselves completely," said Mirko Mikelic, a fixed-income portfolio manager at Fifth Third Asset Management, who plans to buy GM's preferred shares.
GM lost $88 billion from 2005 through just before its 2009 bankruptcy. Underscoring its turnaround it earned a $4.1 billion net profit in the first nine months of the year and is on track for its first full-year profit since 2004.
GM has said it can now break even at U.S. industry auto sales as low as 10.5 million vehicles. That means the restructured GM would have made money in 2008 when the old GM lost $31 billion.
Industry sales are expected to rise to 11.5 million vehicles this year from 10.4 million last year and are widely expected to recover to the pre-recession level of more than 15 million units in the next few years.
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