GM Hikes Stock Price Range Due to Investor Demand

General MotorsA confident General Motors has added 20 million shares of preferred stock to its initial public offering, and it raised the estimated price range for common shares by about 14 percent to $32 to $33.

The Detroit automaker, just 16 months out of bankruptcy protection, will now sell 80 million shares of preferred stock for $50 each when its offering takes place on Thursday. Common shares will be sold by the U.S. government and two other owners, who inherited the stock for helping GM get through a painful restructuring last year.

GM announced the changes in a statement issued Tuesday morning. The automaker gave no reason for the increases, but people briefed on the sale say it's because of high investor demand. One person said bankers handling the sale had seven times more orders for the common stock than shares.

Earlier this month, GM said its owners will sell 365 million common shares for $26 to $29 each. GM also planned to sell 60 million preferred shares for $50 each.

The increase in preferred shares lifts the amount GM will raise in the sale from $3 billion to $4 billion, according to the statement. Final pricing is to be set Wednesday, and bankers may stop taking orders for the shares as early as Tuesday afternoon, according to the person, who asked not to be identified because he is not authorized to speak publicly about the sale.

GM and its owners could sell even more preferred and common shares in the offering. Bankers have yet to exercise an option to sell 15 percent more of the shares due to high demand.

The preferred stock price will stay at $50, but GM's total cost for those shares will remain about the same because it's reducing the expected dividend rate from a range of 5.5 to 6 percent to between 4.75 and 5.25 percent, the person said. The preferred shares will be converted to common stock in 2013.

Bankers have the option to sell roughly 55 million more common shares, although they have not yet decided to do that, the person said.

The common stock price increase is a boon for the U.S. government, which is GM's largest stockholder. The government is trying to get back the $50 billion it gave the company last year to get through bankruptcy protection. Other owners selling stock are the Canadian and Ontario governments and a union health care trust fund.

Demand for the automaker's shares is rising as its financial outlook improves. Last week, GM announced a third-quarter profit of $2 billion, bringing its earnings to a healthy $4.2 billion for the year. In presentations to investors, GM said its debt and labor costs have been cut so much that it can break even at the low point in an auto sales slump. When sales fully recover, the company said it could make $17 billion to $19 billion per year before taxes.

The price hike comes during a week that could be the biggest for IPOs since 2007, according to investment adviser Renaissance Capital LLC. The IPO market has improved steadily since August 2009. The sector had been almost frozen for nearly a year after massive losses on mortgage bonds upended global credit markets.

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Bill

I don't buy Communist products. I won't buy Communist stocks. G.M. just needs to die and go away like it should have done before the Obozo administration stole money from the tax payers in order to keep Government Motors alive long enough to produce the Clown car "Chevy Volt" that no one will buy. GM's mistake was making cars that not only SUCKED, but nobody wanted to buy in the first place. I'm sorry their designers couldn't have come up with any more great idea's for cars, but letting the Camaro die 10 years ago was a mistake just like shutting down Pontiac is now. American Car Companies need to tell the Government to "Shove it" and make cars that are safe and that people want. Get rid of the Dumbocrat C.A.F.E. standard cars. They kill more people than Al Qaida!

November 17 2010 at 2:55 PM Report abuse -1 rate up rate down Reply
Victor

In the short term for GM this is good, but ultimatly if American Auto makers do not make cars as good or better than Japanese and German cars, (yes they have had a number of recalls recently) they will be right back to where they were. As an owner over the years of both Japanese cars and American cars, I can tell you the reliablity and cost of both are so different it's amazing. Sure I'd love to save American jobs, and am as Patriotic as as the next guy. That's why in 1994 I bought a brand new American car, I figured, they had caught up in quality by then since the "energy crisis", however the car was a total money pit. I'm now back to Japanese, a Nissan Altima, that will be 6 years old in May with over 70,000 miles on it, you know what I've done for maintanince for this car? Just two Serpetine belts, and rotated the tires!!!! I still have the original brake pads for goodness sake!!! So now I'm back to just turn the key and go, and just change the oil, every 3 or 4 thousand miles, no more headaches from American garbadge...I previously owned a 1980 Corolla that started it's "life" off as a rental, that I bought with a little over 17 thousand miles of rental mileage on it...that car got over 300,000 miles with no major breakdowns, sold it with original transmission and engine, never did anything to them except change the fluids. Well for those that know already, you know what I'm talking about, for those that keep getting stuck with American junk, you should consider what you buy, but good luck to the American Auto makers for the good of this country.

November 17 2010 at 2:03 PM Report abuse rate up rate down Reply
mdog00

So let me get this straight...We financed GM through "BK" with taxpayer provided bailout money. NOW, they want back in your pocket at an inflated IPO of $33 a share?? Buyer beware, thats a $3-5 stock tops and thats where it will be by December 25th

November 17 2010 at 1:58 PM Report abuse rate up rate down Reply
mdog00

$33.00...are you kidding. First, they stole all of the stock from shareholders when GM went BK...then they got BILLIONS of taxpayer $$$ in bailout funds. Now they want you to give the $33 a share??? That is a $3.00 IPO stock MAX!!! If you pay $33 now you will be licking your wound by Christmas when it is at 3-5 dollars!!!

November 17 2010 at 1:50 PM Report abuse rate up rate down Reply
highgeerstucco

How come everyone forgot about Fords benkruptcy and bailout 6-7 years ago?? plus the tires that were killing people and the vehicles catching on fire even when they were shut off setting many houses on fire.

November 17 2010 at 1:20 PM Report abuse rate up rate down Reply
1 reply to highgeerstucco's comment
Victor

Good point...

November 17 2010 at 2:06 PM Report abuse rate up rate down Reply
tubatelli

Unfortunately, the stock has to be priced high so that us (the taxpayers) can be repaid and possibly not lose money on the deal.

November 17 2010 at 1:15 PM Report abuse rate up rate down Reply
1 reply to tubatelli's comment
mdog00

Tuba...pinch yourself -- the taxpayer has alreadly lost that money, just like the former shareholders that got NOTHING when GM went "BK"...if you pay over $5 a share for this IPO you are kidding yourself

November 17 2010 at 1:52 PM Report abuse +1 rate up rate down Reply
eyecynical

Hey, we've already paid for our "shares" with billions in bailout dollars......So Mr. Obozo, when do we citizens start receiving our dividend checks from GM??...........I will not purchase any GM product........I'd rather support Ford, who didn't take bailout money, who is not owned and controlled by the government and UAW and who did not screw their shareholders.

November 17 2010 at 1:09 PM Report abuse rate up rate down Reply
Rayman

As you have experianced, Welfare is for the rich.

November 17 2010 at 1:01 PM Report abuse rate up rate down Reply
dhplasterman

I received a one share stock certificate in 1968 as a birthday present and as a lesson in investing from my grandfather, an accountant. I signed up the dividend reinvestment plan and watched the shares pile up over the years. As an investor I always supported my company and only drove GM. I'm driving my last one now. So much for having blind faith in any company. Well I'll have to work a few years longer before retirement, but I'll be driving something else to get there. Now about all those certificates..........I know , I'll wallpaper the living room!

November 17 2010 at 12:35 PM Report abuse +1 rate up rate down Reply
carl4369@aOL.COM

i was gm all my life but when i lost my stock iwent ford how about paying us back, or get or shares off a new car,, hope g m dumps like they did us

November 17 2010 at 12:31 PM Report abuse rate up rate down Reply