GM, based in Detroit, is currently majority owned—around 61 percent—by the U.S. Department of Treasury. The federal government and the automaker have been discussing a possible divestiture for months, and late August, GM filed papers signaling that its IPO is underway, likely to go to market in November.
Last week, the Treasury said in a statement that investors in GM could come across “multiple geographies,” though North America will be a focus for GM.
Foreign ownership in U.S. automakers is common in today’s auto industry. Rival “Big Three” automaker Chrysler Group is partially owned by Italy’s Fiat S.p.A., and led by Fiat’s CEO, Sergio Marchionne.
Nevertheless, GM’s IPO will likely invite investors from far and wide, as well as from different segments of industry. The company will put on a two-week “road show” to attract potential investors before the expected stock sale, with stops in all major U.S. cities.
Last week, new GM CEO Daniel Akerson said that it would take years for tax payers to get all of their money back from GM, but the company is committed to fully repaying all of its public debt, according to an interview with AP.
Akerson, GM’s fourth CEO in less than two years, became the company’s chief executive earlier this summer after Ed Whitacre stepped down.
China Interested?
A report surfaced that GM’s currently partner in China, SAIC, is interested in making an investment in GM when its shares go on sale.
The Detroit Free Press reported that SAIC, which is state-owned, is interested in a small stake. Though it remains to be seen whether U.S. regulators would approve the investment given the politically sensitive nature of the deal, the automaker, and its significance to the U.S. manufacturing industry.
In 2005, U.S. regulators rejected a bid by China National Offshore Oil Corporation (CNOOC) to purchase American oil firm Unocal Corp., as CNOOC was interested in Unocal’s extensive assets in Southeast Asia. Unocal later received approval to accept a bid from U.S.-based rival Chevron Corp.
Targeting Small Investors
The U.S. Treasury is hoping to give small investors, including small mutual funds, an equal chance to purchase shares in GM.
The Treasury’s statement on its website outlines guidelines it expects Wall Street investment banks to follow when handling the IPO, includes giving equal opportunities to investors of all sizes.
“We expect that interested retail purchasers will be given ample opportunity to participate, consistent with appropriate commercial practices aimed at maximizing our return and creating a stable trading market for the shares,” the statement read.
In the past, new IPOs—especially ones as hyped as GM’s—are notoriously difficult for consumers and small funds to own, when large investment banks and hedge funds are involved.
