GM May Be Readying an IPO Filing to Raise $16 Billion

General MotorsVolumes have been written on General Motors' initial public offering plan, which has been rumored almost back to when the No.1 car company came out of Chapter 11. CEO Ed Whitacre has said on several occasions that GM wants to pay back the money it owes the federal government via the IPO process.

The latest rumors have been that GM would file an S-1 with the Securities and Exchange Commission as a preparation to the actual event. And it could be that the company is looking to raise $12 billion to $16 billion, according to a report from Bloomberg, which also says GM has secured a $5 billion credit line from 15 banks. The news agency reports that "More than half [of the banks] are named in the draft of the document as underwriters, including Morgan Stanley, JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Credit Suisse Group AG."

GM, which reported net earnings of $1.3 billion in the second quarter on revenue of $33.2 billion, owes the government $50 billion, so the questions the S-1 may answer are: How many shares the Treasury will sell and for what amount? GM's market capitalization would have to be about $70 billion to make the taxpayers whole for the 61% they hold in the company.. Ford Motor (F) has a market cap of $43 billion, so the larger figure may be a stretch for GM.

As with any IPO, one question will be what the company plans as a "use of proceeds." It's assumed that most of the capital will go to the U.S., but GM may also have further plans to expand or to underwrite its growing business in China. GM also needs money to bolster its Vauxhall and Opel operations in Europe.

Where GM spends the money it gets from the IPO is a risk shareholders would face if they invest in the newly public company.

Increase your money and finance knowledge from home

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Introduction to Value Investing

Are you the next Warren Buffett?

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

What a joke, how many are stockholders are going to line up and buy this ipo? thats right the mexicians are!!!! My Father 39 yrs, Myself 13 yrs GM/AAM never again will I buy a GM. Ford all the way

August 13 2010 at 8:31 AM Report abuse +1 rate up rate down Reply

It is so amazing that GM successfully played the role of Tom Sawyer! GM managed to get someone else to pay its way even getting shareholders to pay the bail out money for GM . Oh my, my! I support Obama's bailout of GM ,but GM stole billions that would have gone to support Ford stock price through IPO. I was expecting GM to pay back all on its own.. Was I wrong again! GM is an incredible story!!

August 13 2010 at 12:05 AM Report abuse rate up rate down Reply
Frank Robinson

I am happy that GM is coming out of Chapter 11. GM is an american company that produces first class quality cars. Its ashame that many americans readily complain about the defict and lost of american jobs yet drive imported cars.The Government was correct to support this american icon of company.

August 12 2010 at 4:21 PM Report abuse -1 rate up rate down Reply

I think its GREAT that GM is ready to sell stocks again. They needed a complete re-tooling and thats just what they did. One of the biggest turn arounds in American history. And I think its GREAT that they are going to repay their $50B loan to the Gov. which they have already started repaying. Out of ALL the companies that received a bailout GM seems to be the ONLY company making things right. As soon as the banks paid their money back nothing changed.. things went back to how they were and he beat goes on.. Yet GM sold off under performing brands (i loved pontiac) to make themselves a leading automaker. Hope to seem them at #1 again! I know I sound like a GM lover but I hope people read this and finally open their eyes to the fact that GM isnt a bad company. They just fell on hard times.

August 12 2010 at 1:42 PM Report abuse rate up rate down Reply
1 reply to WINNER's comment

Obama and GM sold out the bondholders so they could buy off the union. I'll never buy another GM car or truck. Just call it Obama motors

August 18 2010 at 12:20 PM Report abuse +2 rate up rate down Reply