GM’s $13bn IPO Re-pay to Reduce Taxpayers’ Headache

Added by Gary Dunn on November 6, 2010

General Motors is finalizing the process of raising $13 billion to re-pay government funds that had made it a taxpayer owned company.

According to documents filed with the Securities and Exchange Commission, the largest ever IPO is the expected to draw funds from all over the world by sale of 365 million shares.

The price range is fixed between $26 to $29 dollars per share. The IPO would raise $10 billion dollars which would be combined with $3 billion from preferred shares sale that, as per law, will get converted into common shares.

The combined amount will be used to repay the taxpayer bailout.

If the price range is fixed at mid point, General Motors would be valued and over $41 billion with Ford, a smaller and better managed company valued at $49 billion. Market value less than $70 billion will cause losses for the taxpayers.

The haste in absorbing the loss is attributed to political reasons. Recovery of funds, improvement in the auto industry and quick exit of the government from bailout – these will lead to political benefits.

The total loss suffered will be around $5 billion which can be avoided only if the shares are traded at $50 per unit post the IPO.