New York, Nov. 18: Updated American taxpayers’ ownership of General Motors was halved on Wednesday, and billions of dollars in bailout money was returned to the federal government, as a result of the nation’s largest initial stock offering ever.
The offering, which raised $23.1 billion, is bigger and more ambitious than had once seemed possible. But the recently bankrupt automaker will have to build on its revival for the government to recoup its entire $50 billion investment and validate the Obama administration’s decision to keep GM from collapsing.
The new shares start trading on Thursday at $33 each. To break even, the treasury department will need to sell its remaining 500 million shares at an average price of $53 each in the months and years to come.
And while the administration may retain great influence over the company, it may not be able to keep stoking the enthusiasm investors have shown for GM stock in recent days.
Still, now that General Motors has shown that it can be profitable, a complete exit by the government could happen even within the next two years.
With the offering, GM is shedding its ties to the government faster than expected, cutting the treasury department’s ownership stake to 26 per cent, from nearly 61 per cent.
The offering, President Obama said on Wednesday, continues “our disciplined commitment to exit this investment while protecting the American taxpayer.”
The administration had argued that saving GM was not just about one company, but about an entire web of businesses connected to its fortunes.
On Wednesday, the nonprofit Centre for Automotive Research released a study saying that government aid to GM and Chrysler saved more than 1.1 million jobs in 2009 and 314,000 jobs this year — the highest figure yet reported.
People involved in the offering process, which was intended to be private, credited recent gains in Ford Motor’s share price as a boon to their own efforts.
Largely seen as incapable of competing with nimbler foreign competitors, automakers such as GM and Ford have turned around their operations by wringing greater efficiency and lowering costs.
GM has raised $18.1 billion from selling common shares and $5 billion from preferred share.