Nov. 17, 2010 (United Press International) -- U.S. automaker General Motors Co. (TSX:GMM'U) (NYSE:GM) has taken J.D. Salinger's advice and raised high the roof beams, increasing the size of its initial share sale 31 percent.
With the increased share volume that could go as high as 550 million shares and an increase in price to between $32 and $33 per share, calculators are warming up. The somewhat modest expectation of raising $10.1 billion now includes the lofty design to potentially break the all-time initial public offering record of $22.1 billion set by the Agricultural Bank of China (OOTC:BACHY) (OOTC:ACGBY) this summer or at least top the U.S. record of $19.7 billion set by Visa in 2008.
Expectations for the sale mean demand grew exponentially with GM posting a $2 billion profit in the third quarter. The company's now S-turn history -- from icon to bankruptcy and now back on the fast track -- is still nowhere near where it wants to be, which is to shed the nickname of Government Motors, which it earned when it accepted $49.5 billion in government loans.
GM has repaid $9.5 billion to the Treasury Department, which has also increased its offering in the sale and now expects to raise $13 billion with the IPO, which would bring its ownership of GM from 61 percent to 26 percent, The Wall Street Journal reported Wednesday.
While that makes it difficult for cynics to call GM a government-run company, which it never quite resembled, the Treasury is playing along in an attempt to recoup part of the $40 billion it is still owed, but not dilute the sale price. If demand remains strong, the Treasury will be owed $27 billion at the end of the week. To say so, for all of GM's advancements in the past year, it is permissible to call any company that owed the taxpayers 27 very big ones "Government Charlie" or "Government Bill" or "Government Nancy," if it came down to that.
If the numbers hold, GM share prices need to rise to $44 for U.S. taxpayers to break even. Taxpayers might also feel slighted by the slant of the sale, which has cut discount brokerage firms out of the loop, the Los Angeles Times reported.
With the sale underwritten largely by four banks that also received billions of dollars in taxpayer funds -- JPMorgan Chase (NYSE:JPM) & Co., Morgan Stanley (NYSE:MS) , Bank of America Corp. (NYSE:BAC) and Citigroup Inc. (NYSE:C) -- the sale is being channeled through brokerage houses that cater to wealthy investors, while overlooking the likes of Charles Schwab Corp. and TD Ameritrade.
Ipofinancial.com President of research David Menlow said, "Wall Street thumbed its nose at," the Times reported, suggesting (quotation marks mine) "individual investors" might have been the end of the sentence.
That was outside of the Times' quotation marks, leaving it to the imagination how Menlow actually finished his phrase. "Wall Street thumbed its nose at," the little guy … the man on the street … Joe Taxpayer … the tempest-tost huddled masses … or something like that.
In international markets Wednesday, the Nikkei 225 index in Japan rose 0.15 percent, while the Shanghai composite index in China lost 1.92 percent. The Hang Seng index in Hong Kong dropped 2.02 percent, while the Sensex in India slid 2.19 percent.
In Australia, the S&P/ASX 200 lost 1.62 percent.
In midday trading in Europe, the FTSE 100 index in Britain slid 0.18 percent, while the DAX 30 in Germany rose 0.34 percent. The CAC 40 in France added 0.51 percent, while the Stoxx Europe 600 index gained 0.2 percent.
