GM shares jump after record public offering
- 18 November 2010
- From the section Business
Shares in General Motors (GM) have risen 3.6% on the first day of trading following the carmaker's record public share offering.
Shares closed at $34.19 in New York from a start of $33, although they did reach a high of $35.60 during the day.
GM raised $20.1bn through its offering, making it the largest share sale in the US to date.
President Barack Obama said the firm was on track to recover the government money spent on bailing it out.
The amount raised could rise to a world record $23.1bn if underwriters exercise an option to sell more shares.
Surprisingly strong investor demand had allowed the carmaker to lift the price of the shares on offer to $33 from the $26 it had initially hoped for.
GM is returning to the market after a $50bn government bail-out.
The Dow Jones Industrial Average closed up 173 points at 11,183, a rise of 1.6%.
Mr Obama said: "Today, one of the toughest tales of the recession took another big step toward becoming a success story.
"American taxpayers are now positioned to recover more than my administration invested in GM, and that's a good thing."
Canada, which pumped in $10bn and owns 12% of the stock, said it too would seek to recover some of its investment by selling part of its stake.
The day's trading began on Wall Street when GM chief executive Dan Akerson rang the opening bell on the New York Stock Exchange.
"There's a lot of work to do, but today is the beginning of the new company," said Mark Reuss, GM's North American president.
Government officials said the company's strong market debut showed they had made the right choice in rescuing the carmaker.
"This is a bit better than people had been projecting. As to a year ago, it's not even in the same ballpark," Ron Bloom, the Treasury official in charge of the GM investment told Reuters.
"A year ago, people said, 'You have no exit, you have no strategy. This company is not fixed'."
The carmaker has raised $20.1bn from the sale of the shares. However, an over-allotment option, which will be settled over the next 30 days, would add $3bn to that figure, taking GM beyond the $22.1bn raised by the Agricultural Bank of China's market launch.
The share sale, known as an initial public offering (IPO), will allow the US government reduce its current 61% stake in the company to as low as 33%.
GM returned to profit this year for the first time since 2004. The company made $5bn during the first nine months of this year.
Scott Painter from the US car comparison site Truecar.com believes the IPO is a sign of how well the economic recovery is going.
"I think GM having a strong IPO and pricing it at the high end of the range certainly speaks well of America and confidence in America, and GM is a really good indicator of everything that we've been through over the last couple of years and how the recovery is working out," he said.