Generic IPO Stock Price Discounted 15% US Government Loss

According to foreign reports, on September 6, according to six sources, GM is actively preparing for a large-scale IPO, which may initially cause the U.S. government to suffer losses.

Whether or not the government sells holdings of shares can be profitable depending on how investors view the new GM, but whether taxpayers can eventually recover the $50 billion in funds that they invest in GM remains to be tested.

A source revealed that after GM’s IPO, the U.S. government may need to spend more than 3 years to fully realize its ownership of GM. This means that the U.S. government’s investment in GM’s investment may push down the next presidential term.

GM's IPO pricing is lower than the cost paid by taxpayers in line with Wall Street's usual practice of giving some of the first investors of the new shares some discounts. However, if GM's issuance price is too low, it is likely that the outside world will see it as a sign of a weaker US economy and slower sales in the auto industry, which will also be detrimental to the performance of GM stocks after listing.

At present, General Motors' IPO preparations are still in secrecy. Therefore, General Motors and the U.S. Treasury refused to comment on the above news.

Earlier, the U.S. government had promised that once GM successfully implemented the IPO, the U.S. government would withdraw its investment in GM as soon as possible, while ensuring that the taxpayer’s investment was fully repaid.

It is estimated that the market value of GM will reach between 50 billion U.S. dollars and 90 billion U.S. dollars. If the U.S. government wants to recoup its investment in GM, the GM's market value must exceed 70 billion U.S. dollars. In general, however, there is a 10% to 15% discount in IPO prices compared to theoretically fair prices to compensate for the risks borne by new investors. And if the market conditions are not good, then the discount rate may be greater. According to sources, "General Motors must convince investors that there is a lot of room for price increases."

In August this year, GM formally submitted an IPO application to the U.S. Securities and Exchange Commission. GM’s largest IPO financing is expected to reach US$20 billion and is expected to become one of the largest IPOs in the world. Earlier reports said that General Motors will start its IPO road show immediately after the midterm election in November, and the formal IPO is expected to be held on November 18.