Treasury Gets $11.7 Bn from GM IPO - Analyst Blog

The Treasury Department of U.S. has received payments of $11.7 billion against its loan extended to General Motors Corporation (GM">GM). The payment was made through the net proceeds from its initial public offering (IPO) last week. The automaker sold 478 million shares at the targeted price of $33, raising $15.8 billion in the IPO. Of this, the treasury has sold 358.5 million shares.

The Treasury has revealed that it would also get $1.8 billion as bankers handling the IPO exercise options to purchase an additional 53.8 million shares of its stock within 30 days of the IPO. The bankers are allowed to exercise an option to sell up to 72 million shares.

Further, the Treasury would receive $2.1 billion due to the sale of preferred shares by GM in the next month. The preferred shares will be converted to common stock in 2013.

The U.S. government expects to recover about half of its unpaid loans to GM. Of the $52 billion in loans extended by the government in exchange of a 61% ownership in the company, $6.7 billion has been repaid in April this year, with $45.3 billion still left to be repaid.

Over and above the net proceeds from the IPO, stock options and sale of preferred shares, GM has stated that it would repay $9.5 billion to the government this year.

After the IPO begun, GM's shares have been listed in the New York Stock Exchange (NYSE) under the ticker “GM”, the symbol under which it traded all along before entering bankruptcy last year.

GM's IPO has been awaited for a long time. The company was desperate to shed its government ownership, which has been hurting its public image. However, the U.S. government would continue to own a third of GM subsequent to the IPO.

In the third quarter of the year, GM has topped both its hometown rivals, Ford Motor Co. (F) and Chrysler LLC, by showing a profit of $2.16 billion or $1.20 per share in sharp contrast to a loss of $858 million or 73 cents per share in the year-ago quarter. Operating income was $1.85 billion versus a loss of $1 billion a year ago.

During the quarter under review, Ford reported a profit of $1.91 billion while Chrysler posted a loss of $84 million. In North America, GM earned $3,005 per vehicle due to its effort to boost truck output during summer. In contrast, Ford earned $2,710 per vehicle and Chrysler earned $593 per vehicle in the region.

GM's profit was fueled by the company's turnaround in North America, which had been witnessing substantial losses earlier, and impressive growth in sales volume in GM International Operations segment.