GM's IPO Will Likely Be Smaller Than First Planned

GM IPO Will Likely Be Smaller Than First Planned
GM IPO Will Likely Be Smaller Than First Planned

General Motors' pending initial public offering of stock was expected to be one of the largest in history. At an anticipated $16 billion, the IPO would have been second only to the $19 billion stock offer by credit card giant Visa (V) in 2008.

But now, the nation's No. 1 automaker is revising its IPO expectations downward, anticipating it will bring in $8 billion to $10 billion when shares go public in November, Bloomberg News reports, citing unnamed people familiar with the matter.

GM's reduced expectations are at odds with the hopes of the U.S. Treasury, which would like a higher price to help recoup its near-$50 billion investment in the once-ailing automaker sooner rather than later. The federal government would have to sell its stake in GM at about $134 a share (before splits) in order to break even on its investment, according to a report Thursday in The Wall Street Journal.

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Setting a lower price would put pressure on the government to ask for higher prices in future offerings. "They're taking a more sober view," Joe Phillippi, principal at consulting-firm AutoTrends, told Bloomberg. "The real question is, what's the price? There are questions in people's minds about the market and the world's economies."

Former GM CEO Edward Whitacre had favored an IPO that would sell as much of the government's position as possible, Bloomberg reported. Whitacre stepped down Sept. 1, handing the CEO reins to Daniel Akerson, but he remains chairman until year's end.

GM and Treasury declined comment on the possibility of a smaller IPO. Both parties are restricted from talking about the deal by securities regulations. GM filed with the Securities and Exchange Commission to begin the stock offering last month, a little more than a year after exiting a government-sponsored bankruptcy.

One question that remains to be answered is how GM's stock will perform in what has been a mixed market for IPOs this year amid a volatile stock market. What's clear is that it will likely to take years for the government to recoup its investment.