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NINETY EIGHT REGENCY

Auditor sets high mark for GM IPO

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Auditor sets high mark for GM IPO

$133.78 a share to repay U.S. in full

BY GREG GARDNER

FREE PRESS BUSINESS WRITER

Shares of General Motors common stock will need to sell at an average of $133.78 each for taxpayers to recoup the full $39.7 billion that the government invested for 61% of the automaker's equity, according to a letter to Sen. Charles Grassley, R-Iowa, from the chief auditor of the Troubled Asset Relief Program.

"This figure does not include the underwriting, legal and other costs that Treasury will incur in connection with the initial public offering will cover," wrote Neil Barofsky, special inspector general for TARP. The letter was dated Aug. 30, but was released Wednesday by Grassley's office.

The letter also stated that Barofsky's office will review GM's proposed acquisition of AmeriCredit, the Texas-based finance company for which GM has offered $3.5 billion.

Grassley asked for the analysis that would show a price from GM's initial public offering at which taxpayers will break even. He also wanted Barofsky to explain the Treasury Department's role in reviewing or approving the AmeriCredit acquisition.

Less than half the Treasury Department's 304 million GM shares are expected to be sold in November after the company conducts a series of presentations to investors in a variety of countries.

The other GM shareholders, which include the UAW's Voluntary Employee Beneficiary Association, the government of Canada and former bondholders of pre-bankruptcy GM, have not disclosed whether they will sell shares.

It will take months and perhaps years for Treasury to sell all its shares. So the first-day price will not allow anyone to conclude whether or not taxpayers will recoup their total investment.

After the initial public offering, all shareholders are free to buy and sell as they choose. GM earned $2.2 billion in the first half of this year. Depending on its financial results in coming quarters, the price could rise or fall.

Barofsky's calculation of the $133.78 price to break even did not include $7.5 million that will be paid to advisory firm Lazard or payments to the investment banks underwriting the offering. Treasury has agreed to pay those banks 0.75% of the proceeds.

Read more: Auditor sets high mark for GM IPO | freep.com | Detroit Free Press http://www.freep.com/article/20100923/BUSINESS01/9230424/1331/Auditor-sets-high-mark-for-GM-IPO#ixzz10MHmFm9D

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