Chinese automaker considering purchase of large stake in GMSeptember 21st, 2010 - 3:46 am ICT by BNO News
DETROIT (BNO NEWS) – China’s largest car manufacturer, SAIC Motor Corp., on Monday said that the company is considering buying a sizable stake in General Motors Co. (GM) when the U.S. company is set to be publicly traded again in the fall, the Wall Street Journal reported.
SAIC Motor Corp., which has and continues to build cars with GM in China since the 1990s, hasn’t made a decision on whether it wants to participate in the initial public offering but has so far expressed interest in doing so, people familiar with the matter said. GM expects to conduct an initial public offering (IPO) in November, which would allow the U.S. government to start selling its controlling 61 percent stake in the automobile manufacturer.
The U.S. Treasury is likely to garner large institutional investors to buy chunks of GM stock at a set, and likely reduced, price. The so called “cornerstone” investors would commit to holding onto the stocks for a set price as a show of confidence to draw in other investors. Several investors have shown an interest in GM, including potential cornerstone investors. The larger the group of cornerstones, the easier it would be for the Treasury to sell larger stakes in the IPO. GM and other banks are pushing for a large investor pool in order for a higher offering size.
The Treasury, however, is worried about the reaction if non-U.S. investors, such as sovereign-wealth funds or a Chinese company, are allowed to acquire significant stakes in GM after U.S. taxpayers spent $50 billion to see it through bankruptcy. “The problem for the White House is that right-wing critics will publicly blast the Obama administration for using taxpayer money to fund foreign ownership in an American icon,” a Morningstar automotive equities analyst said. He followed that by saying that restricting foreigners from buying the stock in the IPO would be impractical, however, since the shares would be available on the public market.
The Treasury said that in an effort to maximize the share price and establish a solid shareholder, all investors will have access to GM shares. The statement also indicated that no single investor or group would receive a “disproportionate share or unusual treatment.”
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Tags: american icon, automobile manufacturer, bno, car manufacturer, chinese automaker, chinese company, chunks, cornerstones, foreigners, general motors, gm stock, initial public offering, initial public offering ipo, institutional investors, morningstar, saic, taxpayer money, u s company, u s treasury, wall street journal