It's no secret that General Motors is back to business and wants to launch an initial public offering. With a fourth-quarter goal set, GM still has a few roadblocks before the stock sale can be launched.
GM may be pushing for an IPO, but so far this year, some 32 companies have withdrawn their offering due to a weak global economy. Its Opel division may have suffered a $500-million loss before interest and taxes, but here in the States, GM recorded a $1.2 billion profit before interest and taxes in the first quarter of 2010.
"GM's earnings potential is excellent because it finally has a healthy North American unit and can focus its marketing efforts on just four brands instead of eight," David Whiston, an analyst for Morningstar Investment Services Inc, said.
The sale of shares is expected to begin sometime in the fourth quarter, but GM CEO Ed Whitacre has at least one project he wants up and running before the offering. He wants GM to have an automotive-based lending division before the sale, something it hasn't controlled since selling a 51-percent stake of GMAC to Cerberus Capital Management in 2006. After that, GM is aiming at a November or December sale, but factors including the world economy and the state of capital markets may delay the sale.
Following its recent $6.7 billion payment to the U.S. government, GM still owes $42.2 billion to the Treasury. GM's current net worth is estimated at $70 billion, but that figure would need to rise to around $80 billion for the U.S. to recoup its investment. The amount of the sale is still undecided, but analysts expect GM to offer some $12 billion in shares. Following the IPO, the government will begin to sell off its 61-percent stake in the company.
"There'll be such a close watch on this IPO," Steven M. Rogé, a manager at New York-based R.W. Rogé & Co. told Bloomberg. "It won't just be financial; it'll be political. It might even be more political than financial."