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U.S. Treasury mulls over foreign investors in GM, report says

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U.S. Treasury mulls over foreign investors in GM, report says

Automotive News Europe -- September 3, 2010 08:16 CET

(Reuters) -- The U.S. Treasury is concerned about how many foreign investors it should allow to buy big stakes in General Motors Co.'s proposed initial public offering, the Wall Street Journal said.

The Treasury is cautious because it is looking to minimize any political fallout from the IPO, the paper said, citing people familiar with the matter.

The Treasury may decide which of the non-U.S. investors, such as sovereign wealth funds, should be invited to be "cornerstone" investors, the people told the Journal.

Cornerstone investors are selected to commit to buying and holding a large stake at a set share price as a show of confidence intended to draw in other investors.

General Motors took a big step toward repaying a controversial taxpayer-funded bailout by declaring plans for a landmark stock offering that represents a critical test for the Obama administration.

The U.S. government currently owns almost 61 percent of GM after converting $43 billion of the $50 billion in funding to the automaker into equity.

The U.S. Treasury could not immediately be reached for comment outside regular U.S. business hours.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100903/ANE/309039996/1317#ixzz0yTgOHxbH

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By Mark Kleis

As the much anticipated initial public offering for the new General Motors approaches, U.S. Treasury officials have reportedly voiced concerns over the potential for foreign investors to buy large stakes in the automaker, sparking them to consider limiting such investments.

The U.S. Treasury’s primary motivator for limiting foreign investors playing a cornerstone role for GM is reportedly fear of political fallout, and according to the Wall Street Journal, sources familiar with the situation say the Treasury plans to selectively limit sovereign-wealth funds to limit political fallout.

Having sovereign-wealth funds acting as cornerstone investors in major U.S. corporations is not a new idea, nor is it particularly uncommon. But unlike the case with GM, usually the corporations seek the foreign funding as a way to help stabilize the IPO and hopefully increase the sales price of the stock due to increased demand.

As is the case with GM, however, there is fear that since American taxpayers have invested over $50 billion in order to rescue the Detroit automaker, the public may not take kindly to the news that taxpayer funds ultimately helped to provide for GM to be largely taken over or controlled by a or many foreign entities.

Catch 22

The situation is a sticky one indeed, as U.S. taxpayers would be able to sell more of the stock and possibly at a higher price should there be no limits on foreign investors. That realization makes for a tough decision for Treasury officials, as they will have to choose between getting the maximum value for the taxpayer investment, or protecting it from foreign takeover.

As it stands now, it is not planned for the Treasury to unload the full supply of GM stock, which means taxpayers will still retain at least a portion of the ownership in the automaker post-IPO.



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U.S. to limit foreign investors in GM IPO?

by Chris Paukert (RSS feed) on Sep 5th 2010 at 4:29PM

According to The Wall Street Journal, members of the U.S. Treasury are worried about General Motors' upcoming IPO. They aren't concerned for the automaker's stock price, or how even how many investors may decide to buy into the company – they're concerned about what country the money is coming from.

The Journal suggests that government officials are considering whether to limit or select which non-U.S. investors would be invited to be so-called "cornerstone" investors in GM's IPO. Cornerstone investors are sought out to purchase and hold sizable stakes in a given company at a set share price. Said price is often lower than what the general investing public can secure, the theory being that the cornerstone investors' presence (and the stability it implies) serves to drive confidence in the company. The fear is that there could be considerable political fallout if, say, some of those cornerstone investors turned out to be from nations like China. Either way, GM will need to firm up its investment plan fairly quickly if it is to allow enough time to court the 'right' cornerstone buyers.

As GM readies its IPO pitch, another key element in the company's talking points will be its long-term stability – including a chief executive officer who plans to stick around a while. New GM CEO Dan Akerson has reportedly told the board that he'll stay at the helm for two to five years - or perhaps even longer. The manner in which his compensation agreement is structured will likely include incentives timed to take effect over a period of years as a way to show investors that he's serious about making a longer-term commitment to the automaker's recovery.



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