General Motors Plans to Sell More Shares at a Higher Price

VOA Breaking News (Voice of America)
November 16, 2010 at 3:30 pm

General Motors’ planned stock offering this week is proving so popular that the company is increasing the price and selling more shares.

The world’s second largest automaker said Tuesday that shares will be priced between $32 and $33, an increase from the $26-to-$29 range it initially announced last week.

GM plans to exercise its right to sell nearly 55 million shares of common stock on top of the 365 million it first announced.

In addition, the company said it will sell 80 million shares of preferred stock. It originally planned to sell 60 million shares.

Txpayers stand to benefit if more shares are sold at a higher price.

The government rescued GM with nearly $50 billion last year and now owns 61 percent of the company, a figure that could be reduced to 35 percent with a successful stock sale.

The public trading of the stock is planned for Thursday. Bankers handling the offering to major investors said it has proved so popular that they could sell seven times the number of shares first offered by GM, which emerged from bankruptcy 16 months ago. In all, the stock sale could yield more than $17 billion for the company.

GM’s attractiveness to investors was enhanced last week when the company announced that it earned a $2 billion profit in the July-to-September period, and is on track for its first profitable year since 2004.

GM so far has repaid or plans to repay the government $9.5 billion. The government has voiced confidence that, over time, it will recoup its entire investment. But some analysts say the stock sales would have to average nearly $44 a share for the government to break even.

This means that further sales beyond those planned this week would have to be at an even higher price, about $50 a share.

GM is anxious to repay the government. It says the perception created by critics of the bailout that GM stands for “Government Motors” has hurt sales.

Some information in this story was provided by AP, Bloomberg and Reuters.