Shares of auto giant General Motors (NYSE: GM) are up almost 9 percent in early trading after yesterday’s blockbuster initial public offering that was estimated to have 30 percent greater demand than initially expected. The offering is the biggest in U.S. history.
GM shares are trading at $35.95 per share as of 9:40 a.m. (EST).
In the wake of a bankruptcy and massive government bailout GM is now expected to raise more than $23-billion in the offering, having priced its common and mandatory convertible junior preferred stock at $33 per share (at the high end of the anticipated price range of $32 – $33 per share.)
The successful offering provides a partial exit for the federal government which provided the automaker with a controversial $50-billion bailout, which gave the Treasury a 61 percent stake in the company.
The government is expected to hold about 33 percent of the company after the IPO. At the $33 per share price, the partial disposition will represent a loss of about $9 billion on taxpayers' original investment (provided the extra shares are sold at the same price). GM’s stock price will need to rise to just below $49 for the government to break even on its follow-on stock sales.
Also, United Auto Workers' stake in the company is expected to fall to 13 percent post-offering.
According to press reports, big North American mutual and pension fund investors will account for more than 90 percent of the IPO. Also, sovereign wealth funds in the Middle East and Asia and other large international investors will account for less than 5 percent of the total GM public offering. China's SAIC Motor Corp. has confirmed on Thursday that it purchased a 1 percent stake.
GM's closest rival Ford Motor Co. (NYSE: F), avoided a government bailout, closed yesterday at just under $17 per share.
GM recently posted a quarterly profit of $2 billion, its third consecutive solid quarter.