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Why GM's IPO Sales Pitch Begins The Day After The Election

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Why GM's IPO Sales Pitch Begins The Day After The Election

General Motors won't start the hard sell of its shares to investors, called a "road show," until Nov. 3, one day after mid-term elections, and the actual IPO now expected Nov. 18. Why? Politics, of course.

GM's drive to get its IPO launched as soon as possible has always struck some critics as politically motivated, attempting to give the Obama administration a "Mission Accomplished" moment just before the Nov. 2 elections. GM executives have said the timing was simply an effort to get rid of the "Government Motors" tag as soon as possible. So why was the pitch pushed back to start one day after the election rather than next month?

Reuters reports the delay will give GM a chance to include third-quarter earnings in the presentation to potential investors. But GM has also warned that its results for the remainder of the year would not match those of the first half, and since the quarter ends Sept. 30, there should still be plenty of time for GM to make a pitch pre-election.

But, with Republicans expected to win scores of seats in this year's campaigns, a pre-election GM road show has the potential to generate far more political attention than even the Obama administration wants. Any GM pitch held before the election could spark the type of demonstrations that threw health-care town halls into chaos last year. Any Republican candidate worth the name could use the GM road show as an effective backdrop, given that the GM bailout ranks among the most unpopular acts President Barack Obama has taken in office.

By starting the day after the elections, the road show removes such pressures while giving the Obama administration one more piece of data to work with in deciding how much of its 60.1% GM stake it wants to put on the market. If Democrats lose one or even both houses in Congress, the pressure will be biased toward selling more. But if Democrats stave off the worst and Obama can claim some small victory, the administration has more breathing room to wait for higher returns.

A few months ago, GM's IPO seemed like a sure bet, with $20 billion estimates for its size being floated and strong potential interest from big investors. Since then, the economy has slowed, GM's board has hired its fourth CEO in 18 months and its numbers have come under more scrutiny. The road show will play up GM's strengths in new models and new management. But GM's best bet may be to embrace the political aspects of its story rather than running from them. There's $50 billion of public money that has kept the company alive, and it's fair to tell critics that rooting against GM means rooting against yourself and your country.



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GM pitch to investors to begin after elections, sources say

September 2, 2010 - 12:01 am ET

NEW YORK (Reuters) -- General Motors Co. plans to begin courting investors for its initial public stock offering immediately after the Nov. 2 U.S. mid-term congressional elections, two sources familiar with the plans said on Wednesday.

GM's roadshow is set to begin on November 3 and will last two weeks, the sources said. The IPO is expected to price on Nov. 17 and debut on Nov. 18, the sources said.

The sources cautioned that the plans were still being finalized and could change based on how U.S. stock markets perform.

Waiting until after the November elections would also allow bankers to tout GM's third-quarter financial results to investors although the automaker has cautioned that the second half of the year will show a slowdown from the first half.

In August, GM filed paperwork for an IPO that could be worth as much as $20 billion, making it potentially one of the biggest IPOs of all time and the biggest new issue in the United States since Visa Inc.'s March 2008 IPO of $19.7 billion.

The final value of the IPO has not been set but one source said early plans for the IPO envisioned selling $12 billion to $16 billion in common stock and $3 billion to $4 billion in preferred stock that would convert to common stock under a mandatory provision.

GM filed paperwork for its IPO just over a year after emerging from a government-sponsored restructuring in bankruptcy. The U.S. government poured $50 billion of taxpayer money into the carmaker and emerged with a 61 percent stake.

Political issues

Despite its success in preventing the liquidation of GM and Chrysler that many analysts had feared, the government bailout of the U.S. auto industry has been criticized by Republican lawmakers and proved unpopular with voters.

The Obama administration is eager to cast the GM IPO as a success, but GM executives and government officials have repeatedly denied any political motivation in timing the IPO for the top U.S. automaker so close to the mid-term congressional elections.

Republicans are likely to gain ground when all 435 seats in the U.S. House of Representatives and 37 of the 100 seats in the Senate are up for grabs in the mid-term elections, analysts say.

The high jobless rate is dragging on the Democrats' poll ratings and Republicans might win control of the House and probably pick up seats in the Senate.

The Obama administration has pledged to begin selling down its stake in GM as soon as practical and had said that process would begin in late 2010 at the time GM exited bankruptcy last year.

A final decision on how much of its stake in GM the U.S. Treasury will sell in an IPO will be made in consultations led by Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers after the terms of the deal are established, sources have said.

GM is waiting for its S-1 filing to be approved by the U.S. Securities and Exchange Commission.

Its shares will trade on both the New York Stock Exchange and the Toronto Stock Exchange since both the U.S. and Canadian governments helped bail it out.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100902/OEM/100909976/1179#ixzz0yPj7MlzR

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Analyst: GM will launch stock sale Nov. 18

Christina Rogers and David Shepardson / The Detroit News

General Motors Co. plans to announce its sale price for its highly anticipated initial public stock offering Nov. 17 and start trading shares Nov. 18, according to a Tampa-based research firm.

The Detroit-based automaker will begin its so-called "road show," with top GM executives selling the virtues of the company's stock to potential investors, starting Nov. 3 -- the day after the midterm elections, said Scott Sweet, senior managing partner for IPO Boutique in Tampa.

Sweet said multiple sources told him about GM's IPO plans; he declined to identify them.

It's unclear if the dates have been finalized, and the Securities and Exchange Commission must approve GM's registration statement before the company can offer its stock for sale.

GM is in a "quiet period" before an IPO, so no one is authorized to discuss the process publicly.

However, a person briefed on the matter confirmed the Detroit automaker's plan to launch a worldwide roadshow after the elections and then hold a sale a few weeks afterward.

GM will court investors in Asia, Europe and around the United States in its extensive roadshow led by Daniel Akerson, who took over as GM's CEO Wednesday.

A post-election road show and sale means GM is likely to announce third quarter earnings before the initial public stock offering. If the third quarter earnings are good, it could push the stock price upward.

The Treasury Department hasn't decided how much of its 61 percent stake in GM it will sell. The government got the equity stake in exchange for about $43 billion in government bailout loans.

Numerous published reports have suggested that the government could sell between $10 billion and $16 billion, but government officials could opt to sell less than that as market conditions dictate.

GM is also likely to sell preferred stock of $2 billion to $3 billion, based on how much common stock is sold. Generally, companies sell preferred stock at a ration of 1:5 to common stock.

From The Detroit News: http://detnews.com/article/20100902/AUTO01/9020466/1148/Analyst--GM-will-launch-stock-sale-Nov.-18#ixzz0yPkcBzar

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Analyst: GM plans to sell shares on Nov. 18


AP Auto Writer

DETROIT (AP) -- General Motors plans to start trading shares again on Nov. 18, timing that allows the company one more quarter of earnings to build its case to investors, a firm that researches initial public offerings said Thursday.

Scott Sweet, the managing partner of IPO Boutique, said GM plans to price the shares on Nov. 17 and begin selling them the next day. He said the automaker wants to start a two-week a road show to drum up investor interest on Nov. 3, the day after the midterm congressional elections.

It's unclear if the dates have been finalized. Two people with knowledge of the process say the automaker's board hasn't approved a date for the IPO but is expected to meet next week to discuss the issue. GM is in a "quiet period" before an IPO, so no one is authorized to discuss the process publicly.

The company filed paperwork for an initial public offering with federal regulators last month. GM spokeswoman Renee Rashid-Merem declined to comment Thursday on the timing of the IPO.

Sweet said his information comes from multiple people on Wall Street but declined to name them. He says the company hasn't yet established a price for the shares, but hopes to raise $15 to $20 billion with the initial public offering.

The timing could disappoint some Democrats who supported the government's $50 billion bailout of GM last year and wanted to point to a successful IPO before the elections. But one more quarter of earnings could help the automaker establish that it is healthy and capable of making sustained profits. GM earned $2.2 billion in the first half of 2010 despite depressed U.S. auto sales, but it lost $3.4 billion in the fourth quarter of last year.

GM said Wednesday its U.S. sales fell 5 percent from July and 11 percent from last August, when they were boosted by the Cash for Clunkers program



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