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General Motors Goes Public About Going Public

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Edward E. 'Ed' Whitacre, Jr.

Edward E. 'Ed' Whitacre, Jr.

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A little over a year ago, General Motors was split in two: stockholders were left with shares in "Old GM", known officially as "Motors Liquidation Company" -- currently trading around $.41 -- while "New GM", now known as "General Motors Company" became a privately held enterprise owned by a range of entities, including the U.S. government. That hasn't gained GM many friends, but CEO Ed Whitacre has been hoping to improve things by taking the leaner, meaner version of GM public soon. And while the "if" of the initial public offering isn't in question, the "when" is clearly up for grabs.

In an interview yesterday, Whitacre told the Wall Street Journal that despite GM's impressive second quarter earnings, the time might not be exactly right for an IPO: "We're not there yet.... I don't know when, I don't know how." That marks a change from previous chatter, which had implied that GM would file IPO paperwork with the Securities and Exchange Commission by mid-August, meaning that the company could go public sometime this fall. Depending on your political affiliation, this is good news or bad.

Democrats are hoping for an IPO before the November mid-term elections. That will give them some level of proof that the divisive bailout of the auto industry is working -- something that will show voters that things are on-track. If that process is delayed, of course, Republicans will be able to point to the lack of an IPO to show that the Dem's plans have failed. And even if GM does meet its fall IPO goal, the feds will likely still hold a majority stake in GM, since most analysts doubt that the Treasury would sell off its stake right away; that's some fairly sure-fire campaign fodder for the GOP.

It might seem like GM would be under pressure to scratch the back of an administration that really went out on a limb to save it, but both GM and the Treasury department insist that the timing of the IPO is in the company's hands. That's not to say that GM won't try to please its Democratic supporters, but it's clearly not obligated to do so.

One of the biggest hold-ups in the IPO process centers on GM securing a $5 billion revolving line of credit (a not-insignificant number, since that's only slightly less than the $7 billion loan that GM repaid the U.S. government). Reports indicate that the credit line is nearly approved, and Whitacre says that GM will release those snazzy Q2 results next week, so who knows? The IPO may be on-target after all. All we know for sure is that the next few weeks should be very interesting.

[WSJ]

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