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General Motors may sell preferred stock alongside its initial public offering of common shares, according to a draft of its regulatory filing and two news agency sources briefed on the plan.
According to Bloomberg News, GM would get proceeds from the preferred offering and will not sell shares itself in the common offering, according to the draft and the news agency’s sources, who declined to be identified because the filing hasn’t been publicly released. The automaker, 61% owned by the government, will seek to raise $12bn to $16bn in the IPO, a source familiar with the plan said last week. The US treasury will sell some of the shares it holds in the company, the sources said.
The offering, which the news agency said might be filed with the Securities and Exchange Commission today, would be the second-largest in US history, behind Visa’s US$19.7bn IPO in March 2008. Outgoing GM CEO Ed Whitacre has pushed to end government ownership of the company which received a $50bn taxpayer bailout following its bankruptcy in June 2009.
“They can hopefully generate enough funds to help operations,” said James Bell, executive market analyst at Kelley Blue Book in Irvine, California, told Bloomberg. “But the more important issue for them is to reduce the government’s position, in terms of the company’s public image.”
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By GlobalDataThe preferred shares were added to attract hedge funds and other new investors because the shares have attributes of both debt and equity, the sources said.
The preferred shares will be convertible to common stock at a price that wasn’t specified and are contingent on the completion of the common share sale, according to the Bloomberg sources, who verified details of the IPO registration draft that may be modified before it is filed with the SEC as early as today. The proceeds will be used for general corporate purposes. GM’s initial offering is code-named “Project Dawn,” according to the draft document. The common shares will be listed on the New York Stock Exchange and the Toronto Stock Exchange, while the preferred stock would be listed on the NYSE, according to the report.
GM aims to sell a fifth of the Treasury’s 304m shares, two Bloomberg sources familiar with the plan said in June. That would cut the government’s stake to less than 50%.
The automaker may hold the offering in November, other sources familiar with the matter have said. GM also may sell stock owned by Canada and a union-led retiree health-care trust, a person familiar with the matter has said.
GM spokespeople did not immediately return calls seeking comment.
