The last few months have been packed with news, reports, and rumors about General Motors’ upcoming Initial Public Offering (IPO), and the latest report from Reuters doesn’t help one bit. According to a “source familiar with the situation,” The General has pushed the filing back to August. Apparently, GM has a few financial issues it would like to address before going public.
The biggest issue is CEO Ed Whitacre’s desire for a $5 billion revolving line of credit that would give our favorite automaker a cushion in the event of a possible double-dip recession, an event that’s being widely discussed in economic circles.
The funds could also be used for expansion and to finance the restructuring of GM’s European division. So far, four banks, including Bank of America, Citigroup, JPMorgan Chase, and Morgan Stanley have pledged $2 billion, with the balance expected to be wrapped up in about a week. The Reuters report didn’t mention Whitacre’s goal to reinstate a captive finance arm before the offering takes place.
Current reports estimate that the initial offering will be in the range of $15 to $20 billion. The U.S. Treasury, which owns roughly 61 percent of GM, plans to sell somewhere between 20 to 24 percent of its stake, or $10-12 billion worth of shares. What’s more, sources say that GM is looking for a broad investor base and would rather cut the valuation on the IPO than delay it.
The GM Authority Take
Of course, we’ll have to wait and see how this pans out, but I wouldn’t be surprised to see the IPO take place in late Q3 or early Q4 2010 than in August of this year. The reasoning behind my prediction is rather simple: today, there’s not enough investor confidence in a company that has been bailed out by the U.S. and Canadian governments only a year ago and has since then had only a single profitable quarter. As Q2 and Q3 come around and GM posts strong results for both quarters, investors will be more comfortable buying and recommending GM stock.[Source: Reuters]