General Motors Co is boosting the size of its common stock offering by more than 30 percent to US$15.5 billion, two people familiar with the matter said, potentially making its landmark initial public offering (IPO) the largest US offering ever.
The expansion comes in response to surging demand from investors, who had put in orders worth US$70 billion for GM’s common shares by late on Tuesday, the sources said.
The IPO, which will reduce the US Treasury to a minority shareholder in the top US automaker, could raise nearly US$23 billion if underwriters exercise the full overallotment option on both common and preferred shares.
The deal could also pay back more than US$15 billion to the US government, assuming that shares price at the high end of the range and all of the common stock on offer is sold.
That would take US President Barack Obama’s administration closer to break-even on a still controversial bailout that some critics had predicted would be a financial quagmire for taxpayers.
The largest US IPO to date was Visa Inc’s US$19.7 billion stock sale in 2008.
The increased size of the GM IPO reflects renewed confidence in the outlook for the world’s No. 2 automaker less than a year and a half after dwindling cash and falling sales pushed it into a bankruptcy funded by the US Treasury.
GM plans to sell 478 million common shares for US$32 to US$33 each, raising about US$15.5 billion at the mid-point, people familiar with the situation said.
But the strong demand means that the IPO price is likely to settle at the high end of the new price range at US$33, one person familiar with the matter said.
In another sign of the deal’s positive reception, GM earlier on Tuesday increased the size of its preferred stock offering by US$1 billion to US$4 billion in a move that will strengthen its balance sheet by paying down pension debt — one of the concerns investors had cited heading into the IPO.
The final terms for GM’s IPO are expected yesterday. The stock is set to begin trading on the New York and Toronto exchanges today.
GM plans to file an amended S-1 document with the US Securities and Exchanges Commission detailing the increased number of shares on offer, the sources said.
Other auto executives said the strong investor interest in GM was a sign of the turnaround in sentiment for the battered auto sector.
“If the GM IPO does well, the whole industry does well,” Spyker chief executive Victor Muller told the Reuters Autos Summit in Los Angeles, California.
“A successful IPO for GM, I think, is going to set the stage for more interest in automotive stocks, which can only help,” said Muller, who negotiated a deal to buy Sweden’s Saab from GM earlier this year.
Henrik Fisker, CEO of Fisker Automotive, who has said his start-up electric car maker could consider an IPO after launching its first car next year, agreed.
“I think it’s a good sign, the interest in General Motors because it’s a good sign for the car business in the US,” Fisker said.
FERRARI FLOAT?
Meanwhile, Italian auto giant Fiat said on Tuesday a stock market float for its iconic sports car brand Ferrari was among strategic options for the company after a major restructuring is completed.
Fiat made the statement in response to a request by the bourse authorities for clarification of reports on Monday based on analyst notes that it intended to merge fully with US auto group Chrysler and could offer shares in Ferrari.
Fiat is currently restructuring its business to separate out its industrial activities to leave a core auto unit by January.
The company noted that “analysts have drawn different conclusions,” adding that some may have gone too far in supposing that Fiat and Chrysler were to merge.
Fiat has owned 20 percent of Chrysler since the US company came out of bankruptcy in June last year and it is set to increase its stake to 35 percent by the end of next year. It holds 85 percent of Ferrari.
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