GM
A brief background and sources for more information on the General Motors float of 2010.
An example of an IPO.
Short finance history:
- General Motors Corporation was a large American multinational automotive corporation headquartered in Detroit, founded as a holding company for Buick.
- GM entered bankruptcy protection Jun-09 (i.e. Chapter 11): good assets sold to Vehicle Acquisition Holdings LLC and renamed General Motors Company LLC; other assets and many debts remained as the ‘bad company’ and renamed Motors Liquidation Company (now traded over-the-counter as MTLQQ).
- Ownership after re-organisation was U.S. Department of the Treasury (60.8%), Canada and Ontario governments (11.7%), ‘old’ GM’s unsecured bond holders (10%) and UAW Retiree Medical Benefits Trust (17.5%). Also the latter two hold warrants exercisable at around $10-18/share
- Interest rate on loans was 7%; on preferred stock 9%.
- Loans from US Treasury repaid early.
- The IPO process: Share split of 3:1 ahead of Nov-10 IPO. Shares to be sold by sales by the US Government and the Trust only, who in turn are restricted from selling beyond the IPO for six months.
- Book build saw high order requests which saw offer price raised to $33, underwritten for a fee of 0.75% (versus fees typically around 7%) by a syndicate of 35 investment banks, led by Morgan Stanley, JP Morgan, BofA Merrill Lynch and Citi.
- Road show for investors spearheaded by GM Chief Executive Dan Akerson and Chief Financial Officer Chris Liddell, a New Zealander. Earlier Liddell initiatives: focus on communication within finance group, and between Finance and the board/investors e.g. 15pp IPO presentation (CFO and NYTimes)
- Net proceeds raised of US$15.8b from offer, plus $4.8b from 4.75% convertible preferred stock. Treasury receive net proceeds of $11.7b from sale of 358.4 shares (i.e. $33/share less 0.75% fee)
- Plus underwriters exercised the ‘Green Shoe over-allocation’ right to sell a further 15% at the offer price within the IPO, raising an extra $1.8b for Treasury. (http://www.dailyfinance.com/2010/12/02/general-motors-ipo-nets-another-1-8-billion-for-the-u-s-treas/). This is effectively over-selling by the underwriters who can buy these shares back if the prices falls below $33 in the first 30 days of trading – thus providing a means to manage any price falls – or buy them off the issuer at $33 if the share price rises.
- GM (US) and GMM (Can) retained as tickers from earlier days but shares did not regain place in major US equity indices.
- 1-day gain of 3.6%.
- Liddell resigns and is replaced by ex-Waikato graduate Dan Ammann.
References:
WSJ
MarketWatch
IPOHome
