DETROIT — Fueled by strong investor demand, General Motors is setting a higher share price for Thursday's initial public stock offering. Also, GM plans to expand its IPO by 31 percent, to 478 million common shares, the Associated Press says it learned Tuesday from a person briefed on the sale.
The moves could make GM's IPO the largest in history for a U.S.-based company. If GM's sale of preferred shares is included, the offering could have a total value of $21.6 billion, topping Visa's $19.7 billion IPO in 2008, according to the IPO tracking firm Dealogic.
GM is expected to announce the final price of the IPO today and shares will start trading the following day at $33 each, AP learned from the person, who asked not to be identified because he is not authorized to speak publicly about the sale.
Most of the additional shares will be sold by the U.S. government, the Associated Press learned. A union health care trust would sell a small part of the additional shares.
Bankers handling the GM IPO will take an option to sell an additional 55 million shares, bringing the total value of the common shares sold to $17.6 billion. The company will sell preferred shares worth $4 billion, bringing the total value of the deal to $21.6 billion.
During the past two weeks, investor interest in GM has risen as the company's executives flew across the globe making pitches to big investors. The company has made profits for three straight quarters and thinks earnings could increase even more if the U.S. auto market rebounds from a 30-year low last year.
At $33 apiece, the total value of the 1.978 billion outstanding GM shares would be about $65 billion, nearly enough for the government to get back all the taxpayer dollars it used to get GM through a painful bankruptcy restructuring.
"If GM performs as expected, the stock will steadily improve in valuation," rising to $45 or more in the next year, said Joe Phillippi, president of AutoTrends Consulting in Short Hills, N.J.
GM's improving finances are pushing up demand for the shares. Last week, it announced a third-quarter profit of $2 billion, bringing its earnings to a healthy $4.2 billion for the year. In presentations to investors, GM said its debt and labor costs have been cut so much that it can break even at the low point in an auto sales slump. If sales fully recover, the company said it could make $17 billion to $19 billion per year before taxes.
There still are problems, though. Even after the IPO, GM will be about 40 percent owned by the government, which the company said has irked buyers and cost it sales. GM's pension plans have far less money than they need, and the company's European operations are losing money.