GM: General Motors is on the stock market road again. After an overambitious start to the process, the automaker's initial public offering settled at a sensible size, met strong demand, got upsized and up-priced and finally, on its Thursday morning debut, popped higher - by a defensibly modest 7 per cent, at least initially. So far so good for GM’s market rebirth; now the future is about the underlying business.
IPO lead underwriters Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Citigroup have certainly done their job. They nursed an appearance-conscious and not entirely consistent-seeming US government through the process, along with a spanking new management team at GM. By pitching the initial $26 to $29 per share price range at a level that pulled in a lot of demand, the banks laid the groundwork for an increase to an eventual $33 a share - and an increase in the number of shares sold. A tailwind from industry data and stock market buoyancy helped, too.
It’s an article of faith that a successful IPO trades higher on its debut, but it wouldn’t have looked good if the stock immediately skyrocketed. That would have left Uncle Sam, owner of a 61 per cent stake before the flotation, open to accusations of leaving too much on the table. But anything up to around a 10 per cent pop is easily defended - and as of Thursday morning, the rise in GM’s stock price was holding under that level. That’s a credit, and no doubt a relief, to the underwriters.
Now the real work begins. GM and its bosses still need to prove the longevity of financial improvements seen in recent quarters and their ability to make further strides on product quality. The government, whose stake has been cut almost in half by the IPO, is still out of the money, needing to make something north of $50 a share on its remaining stock if taxpayers are to break even on their bailout of the carmaker. That will only happen with sustained acceleration rather than comfortable cruising.
GM’s bosses, led by Chief Executive Dan Akerson, surely know that their efforts will now move squarely into the spotlight. They will be hoping they can carry on where the underwriters are leaving off.