General Motors (GM) on Wednesday priced shares for its initial public offering at $33 apiece, near the high end of Wall Street expectations. The sale values the car maker at about $50 billion and allows its largest shareholder, the U.S. Treasury, to recoup a sizeable chunk of the investment it made over the last two years to rescue the company.
GM, which will begin trading Thursday on the New York Stock Exchange, is expected to raise $22.7 billion for taxpayers and other big shareholders, including a United Auto Workers retiree health fund. After the sale is completed, the government's stake in the company, which filed for Chapter 11 bankruptcy protection in June 2009 and emerged from the process a month later, will fall by about half to 26 percent.
The $33 share price reflects strong investor demand and is considerably higher than the price range of $26 to $29 being discussed just a few days ago. Assuming the anticipated number of shares is sold, the IPO will be the largest in history, surpassing the $22.1 billion raised earlier in 2010 by the Agricultural Bank of China and the $19.7 billion that Visa raised in 2008.
GM appears to be doing well out of the deal, but what about the throng of new shareholders that the company will acquire in the next few days? Time will tell, but keep in mind that it's a bit of a misnomer to call the share sale an IPO.
A new corporate entity emerged from bankruptcy in 2009, but GM's real IPO occurred before World War I. The stock was first listed on the NYSE in 1916 and became perhaps the most important market bellwether for the next half-century.
After that, however, the dominance of GM and its stock eroded, and the deterioration gathered pace as the 21st century arrived and it became clear that the company, its management, labor practices and ultimately its cars were trapped in the 20th. How the stock - the one being created, not the one that vanished with barely a trace in 2009 - performs depends on just how new the new GM really is.
If the company proves that it can make vehicles that are at least a match for Ford (F) and numerous rivals in Japan, Germany and emerging economies like Korea, then the stock may be a solid performer. But with such a spectacular legacy of failure to live down, and with an economy that has done some spectacular failing of its own in the last few years, caution toward GM is warranted.