Taxpayers Receive Additional $1.8 Billion in Proceeds from GM IPO

That's nice. Too bad there's no word on when we'll see the rest of it.

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Taxpayers Receive Additional $1.8 Billion in Proceeds from GM IPO

December 2, 2010
TG-992

Taxpayers Receive Additional $1.8 Billion in Proceeds from GM IPO

Exercise of Over-allotment Option Brings Total Taxpayer
Proceeds from GM IPO to $13.5 Billion

IPO Reduced Treasury's Common Stock Stake in GM
by Nearly Half from 60.8 Percent to 33.3 Percent

WASHINGTON – The U.S. Department of the Treasury announced that it today received $1.8 billion in additional net proceeds from General Motors' (GM) initial public offering (IPO), bringing overall net proceeds for taxpayers from the GM IPO to $13.5 billion.

On November 23, Treasury received $11.7 billion in net proceeds from the sale of 358,546,795 shares of common stock in GM's IPO. The underwriters in the offering had a 30-day option to purchase up to 53,782,019 additional shares of common stock from Treasury at the same price to cover over-allotments. The underwriters exercised this over-allotment option in full on November 26, and Treasury today received $1.8 billion in net proceeds from the sale of those additional shares.

"General Motors' IPO is a testament to that company's turnaround and the significant progress we have made continuing to exit our investments and recover taxpayer dollars," said Tim Massad, Acting Assistant Secretary for Financial Stability.

The exercise of the over-allotment option increased the overall amount of GM common stock that Treasury sold in the GM IPO to 412,328,814 shares. In total, the GM IPO reduced Treasury's ownership of GM's outstanding common stock by nearly half from 60.8 percent to 33.3 percent.

U.S. Department of Treasury Participation in the GM IPO
	Shares of Common Stock Sold	Net Proceeds ($ billions)
Initial Sale	358,546,795	$11.7
Over-Allotment	53,782,019	$1.8
Total	412,328,814	$13.5

Treasury has invested a total of $49.5 billion in General Motors. In October, Treasury announced that it accepted an offer by GM to repurchase $2.1 billion of preferred stock – a transaction that is expected to occur in mid-December 2010. With this repurchase and the IPO, taxpayers will have received a total of $23.1 billion from GM through repayments, interest, and dividends since the company emerged from bankruptcy in July 2009. Following the IPO and the preferred stock repurchase, Treasury's remaining stake in GM will consist of 500,065,254 shares of common stock.

Treasury Investment in GM	($ billions)		Return from GM	($ billions)
Pre-January 2009	13.4		Net IPO Proceeds	13.5
Post-January 2009	36.1		Debt Repayment	6.7
			Proposed Preferred Stock Repurchase	2.1
			Interest & Dividends	0.8
Total	$ 49.5		Total	$ 23.1

The proceeds from the GM IPO bring the total amount of TARP funds that have been returned to taxpayers to nearly $254 billion.

TARP Funds Returned to Taxpayers	($ billions)
Repayments Prior to GM IPO	204.3
Profits from Dividends, Interest, Warrant Sales, and Other Income	31.0
Cancelled Commitments (Asset Guarantee Program)	5.0
GM IPO	13.5
Total	253.8

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GM IPO Fail

So right now, everybody is singing the praises of the General Motors IPO. The underwriters have exercised in full their over-allotment options to the tune of 71.7 million additional shares, bringing the total proceeds of the IPO to $23.1 billion.

Sounds good, right? $23.1 billion dollars. A record-setting IPO! We beat the Chinese! (They held the previous record at $22.1 billion, for Agricultural Bank of China.) USA! USA! USA!

USA! USA! USA! US... oh, wait.

Yeah, that's right. If they throw all of that money at what they owe us, the collective American taxpayer, for the largess the government extended to them on our behalf, they will only owe us somewhere between $26.4 billion and $26.9 billion.

Let me say that again. If they put everything on principal, they still owe us between $26,400,000,000 and $26,900,000,000. Depending on which bailout figure you use.

Fail. Your pick on whose part.

About That GM IPO...

Bloomberg has an interesting analysis of the fallout of that IPO.

GM’s owners, including the U.S. Treasury, sold at least $15.8 billion of common shares at $33 each, making it the second-largest U.S. IPO on record after San Francisco-based Visa Inc.’s $19.7 billion sale in March 2008, a statement and data compiled by Bloomberg showed. An overallotment option and a sale of preferred shares may boost the total raised to $23.1 billion, more than the $22.1 billion sold by Agricultural Bank of China Ltd. in the largest IPO of common stock in history.

Sounds pretty good, right? I mean, I don't know about you, but I wouldn't turn my nose up at between $15.8 billion and $23.1 billion.

There's a catch, though. Over the last two years, GM has received around $50 billion in bailout loans (the Bloomberg article puts it at $49.5 billion, but what's a measly $500,000,000 between friends?). As a result... well, I'll let the Bloomberg article speak for itself:

The Treasury needs to sell all of its GM shares at an average price of $43.67 to break even on its investment, data compiled by Bloomberg show.

GM closed at $34.19 today, so we only have to hope it goes up at least 27% and then stays there while the Treasury unloads somewhere between 500,065,254 and 553,847,273 shares of common stock (which is roughly 37% of the outstanding shares of GM). All without crushing the price per share of GM.

Put another way, it's P/E ratio needs to drop to about 5.89. Now, looking at the following facts from the Bloomberg article:

GM, which lost $82 billion from 2005 to 2008, was valued at an average of 10.3 times profit from 2000 through 2004, monthly data compiled by Bloomberg show.

And:

At $33 a share, GM is valued at 7.8 times this year’s earnings, based on its net income in the first nine months of 2010. Dearborn, Michigan-based Ford Motor Co. trades at 8.1 times analysts’ estimates for 2010 profit, the data show. Ford has been the world’s most profitable automaker this year through September.

This leaves me with no real hope that we, the taxpayers, will see our investment pay off.

Daily Wrapup

Dow up 173.35 (1.57%). NASDAQ up 38.39 (1.55%). S&P 500 up 18.10 (1.54%). Not a bad day, particularly if you manage not to think about what happened the last few days. Of course, we need at least one more day like today just to make up for Tuesday's wretched performance, but let's not dwell on that right now.

Most of the credit seems to go to the GM IPO, and to the Philadelphia Fed Index. GM managed to trade something like 452 million shares today, and it managed a $0.89 premium for it's IPO buyers, even at it's low for the day. Good on you, you lucky few who managed to get the shares at the IPO. Good on you. And the Philly Fed Index was just too good to be believed. Also, if you're concerned about the PIIGS, there was good news there. Quoting from Reuters:

Ireland's central bank chief expected the country to receive tens of billions of euros in loans from European partners and the International Monetary Fund to help shore up its shattered banks and stabilize the economy.

"The fear was what would happen if Ireland were to go down, what reverberations and aftershocks we were going to see," said Paul Larson, equities strategist at Morningstar in Chicago.

"What this does is to steady that first domino."

Markets have fallen recently on concerns that unless Ireland received a bailout, problems in other heavily indebted euro zone members would spread, hindering a global recovery.

Shattered banks. Gotta love that turn of phrase.

GM's IPO and US data lead to stocks' strength

* GM IPO leads the charge for global stocks
* Government bond prices fall, Irish debt tensions ease
* Commodity prices rebound (Updates with U.S. markets, GM's public trading debut)

By Daniel Bases
NEW YORK, Nov 18 (Reuters) - A blockbuster General Motors Co stock offering dovetailed with upbeat U.S. economic data and easing Irish debt tensions to lift global stocks on Thursday, while the dollar gained on the yen and cut losses versus the euro.

GM's return to the market less than 18 months after it emerged from government-funded bankruptcy raised $20.1 billion, the largest initial public offering in U.S. history, and provided a positive backdrop for investor sentiment.

"The company has rid itself of a lot of liability costs, so there is good reason for this excitement and demand," said Paul Larson, equities strategist at Morningstar in Chicago. "And with all the pent-up demand for vehicles, the outlook for the whole industry is very bright."

Commodity prices rose while U.S. government debt prices fell as credit tensions eased.

Manufacturing activity in the U.S. Mid-Atlantic region grew much more than expected, according to a survey from the Philadelphia Federal Reserve Bank. An improvement in the latest weekly initial claims for jobless benefits also helped strengthen the U.S. dollar.

The U.S. data helped erode the euro's gains as uncertainty about the Irish crisis ebbed after Dublin agreed to work with a European Union-International Monetary Fund mission on steps to shore up its shattered banking sector.

But analysts remained skeptical that any rebound in risk appetite would be sustained, with fiscal problems still severe in Ireland and other peripheral euro-zone countries such as Portugal, and many investors inclined to cut risk exposure before year-end.

"It's absolutely vital for the authorities to take pro-active steps in order to try to resolve this crisis as soon as possible. The market should see some relief in relation to that," said Henk Potts, equity strategist at Barclays Wealth.

In late morning trade, the Dow Jones industrial average rose 177.83 points, or 1.56 percent, to 11,179.71. The Standard & Poor's 500 Index gained 19.55 points, or 1.66 percent, to 1,198.14. The Nasdaq Composite Index climbed 46.94 points, or 1.89 percent, to 2,522.95.

GM's common stock, priced at $33 in the initial public offering on Wednesday night, was up 6.8 percent at $35.25 around noon on the New York Stock Exchange.

The pan-European FTSEurofirst 300 index of top shares climbed 1.34 percent to close provisionally at 1,107.07 points after being as low as 1,091.06.

The MSCI world equity index was up 1.71 percent after touching a one-month low the previous day.

The gains came after Japan's Nikkei jumped 2.1percent to close above 10,000 for the first time since late June, while China shares also rose. Emerging stocks were up 1.6 percent.

EURO'S GAINS PARED
The enthusiasm for stocks led to some paring back of the euro's gains after Ireland's central bank chief said he expected Dublin to receive tens of billions of euros in loans from European partners and the IMF.

The euro was up 0.73 percent at $1.3618, but that represented a pullback from its earlier gain of 1.1 percent to a session high of about $1.3668 on trading platform EBS.

The dollar was down 0.48 percent against a basket of currencies.

The dollar rose 0.47 percent to 83.63 yen .

The benchmark 10-year U.S. Treasury note fell 17/32 of a point in price, pushing the yield up to 2.95 percent.

The 10-year Irish/German government bond yield spread was last at 567 basis points, around 15 basis points tighter for the day but off the session's tightest levels.

U.S. crude oil futures rose $1.78 to $82.22 per barrel and retraced part of a four-session drop, while spot gold gained $19.40 to $1,356.20 an ounce. (Reporting and writing by Daniel Bases; Additional reporting by Jessica Mortimer, Wanfeng Zhou, Ryan Vlastelica, Atul Prakash and Neal Armstrong; Editing by Jan Paschal)

Treasury Announces Pricing of Public Offering of General Motors Common Stock

Treasury Announces Pricing of Public Offering of General Motors Common Stock

November 17, 2010
TG-959

Treasury Announces Pricing of Public Offering of General Motors Common Stock

WASHINGTON – The U.S. Department of the Treasury announced today that it has agreed to sell 358,546,795 shares of its General Motors (GM) common stock at $33.00 per share, as part of GM's initial public offering. The underwriters in the offering have a 30-day option to purchase up to 53,782,019 additional shares of common stock from Treasury on the same terms and conditions to cover over-allotments, if any. If the underwriters' over-allotment option is exercised in full, the aggregate gross proceeds to Treasury from the offering are expected to be approximately $13.6 billion, before giving effect to any fees associated with the offering.

After this offering, Treasury's ownership of GM's outstanding shares of common stock will decline by nearly half – from 60.8 percent to 36.9 percent (33.3 percent if the underwriters exercise their over-allotment option in full).

"GM's initial public offering is an important step in the turnaround of the company and for our work to recover taxpayer dollars and exit this investment as soon as practicable," said Treasury Secretary Tim Geithner. "It is now widely recognized that the taxpayers' investment not only helped save jobs during the worst economic crisis in a generation but also gave the auto industry a solid foundation on which to build."

After this offering, Treasury's remaining investment in GM will consist of 553,847,273 shares of common stock (500,065,254 shares if the underwriters exercise their over-allotment option in full).

A registration statement relating to these securities was declared effective by the Securities and Exchange Commission (SEC) on November 17, 2010. Any offer or sale of these securities will be made only by means of a written prospectus forming the effective registration statement. Copies of the prospectus relating to the offering may be obtained for free, by visiting the SEC website at http://www.sec.gov or by contacting:

· Morgan Stanley & Co. Incorporated, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, New York 10014, telephone 1-866-718-1649, or by sending an email to prospectus@morganstanley.com

· J.P. Morgan Securities LLC, Attention: Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, telephone 1-866-803-9204

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Stocks little changed as banks offset retail stocks

By Leah Schnurr
NEW YORK (Reuters) - Stocks ended little changed on Wednesday with indexes unable to recoup recent losses as banks wilted on worries about Federal Reserve regulation of the sector going forward.

Indexes also suffered from the continued uncertainty of Ireland's financial crisis, which contributed to Wall Street's drop of nearly 2 percent on Tuesday.

"I think the market is in a deterioration trend. It's worrisome at this point, considering that we had a selloff yesterday with pretty big volume and poor advance-decline numbers," said Frank Gretz, market analyst and technician at the Shields & Co brokerage in New York.

"The market is certainly vulnerable, and I think it is in fact headed for a correction."

Financials sagged after the Federal Reserve said it will allow some banks to increase dividends but would also evaluate the ability of 19 large institutions to withstand losses in "adverse" economic scenarios.

The KBW bank index gave up 1.4 percent. Regional bank KeyCorp (KEY:$7.6800,$-0.3000,-3.76%) slid 3.8 percent to $7.68 after Credit Suisse downgraded its shares.

Volume was light and some of the day's quietness was due to investors awaiting the pricing of General Motors' initial public offering after the market's close, said Nick Kalivas, senior equity index analyst at MF Global in Chicago.

The automaker set the terms for a landmark IPO that could be the largest in U.S. history, raising up to $22.7 billion.

"There's a feeling a lot of money has been sucked out of the market to go pay for that. Once that gets out of the way, that theory's going to be put to the test," said Kalivas.

The Dow Jones industrial average was off 15.62 points, or 0.14 percent, to 11,007.88. The Standard & Poor's 500 Index edged up 0.25 point, or 0.02 percent, at 1,178.59. The Nasdaq Composite Index added 6.17 points, or 0.25 percent, to 2,476.01.

Retailers kept a floor under the market as discount chain Target Corp (TGT:$55.6200,$2.0800,3.88%) rose 3.9 percent to $55.62 after it forecast its best same-store sales in three years during the upcoming holiday season. The S&P consumer discretionary group rose 0.7 percent.

Investors kept a close eye on the situation in Ireland. Dublin agreed to work with a European Union-International Monetary Fund mission on urgent steps to shore up its shattered banking sector, a process that could lead to a bailout despite Ireland's deep reluctance.

The CBOE Volatility index , Wall Street's so-called fear gauge, declined 3.6 percent but remained above 20. On Tuesday, it closed at its highest point in more than a month.

In the latest U.S. economic data, housing starts slumped to their lowest level in more than a year in October, while consumer prices rose, but the annual increase in core CPI was the smallest on record.

(Reporting by Leah Schnurr; Additional reporting by Angela Moon; Editing by Kenneth Barry)