Hide your kids, hide your wife, and hide your husband. News and further developments surrounding GM’s impending IPO continue to leak out and this time, it concerns The U.S. Treasury. According to reports, the Federal financial arm has recently voiced concerns about foreign investors potentially buying too many shares in our favorite automaker. Because of the issue, the Treasury is considering limiting foreign investments in General Motors.
Now before we let out our collective gasp, we have to remember that the U.S. Treasury is still The General’s primary shareholder. Apparently, the Treasury’s primary reason for concern is the overarching political fallout. Foreign investors often hold large amounts of shares of U.S. companies. Usually, this is done to stabilize IPOs and increase prices through greater demand. If this scenario plays out for GM, then taxpayers could be frustrated that $50 billion of their money was put into a company only for foreign entities to buy up large shares of The General… and eventually benefit financially.
The other side of this double-edged-sword is that taxpayers would probably be able to sell more shares at higher prices without limits on investments from abroad. This makes the scenario quite difficult for the Treasury, as it must chose between getting maximum value for shareholders (taxpayer and foreign investment) or protecting the same shares from international takeover. The largest factor that will make the latter situation a little bit easier to unfold is the final fact that the Treasury is reported to only sell a fifth of its holdings come the IPO. By doing so, it will retain at least part ownership until all of its shares are sold (if ever), selling these at a potentially higher price down the road if there are no restrictions on investment. Whatever happens, this is sure to be a case study for years to come.[Source: Wall Street Journal via Left Lane News]