In the midst of the one of the worst car sales environments in US history, GM has announced details of its IPO.

If the company were not the leading auto company in the world’s largest car market–China–the deal may not have made it to market at all. GM and its ventures in China sold 199,641 vehicles last month, up nearly 20% from the year before. That pushed its sales for the first 10 months of the year to 1,976,913 vehicles, which is up 36%. The largest US car company said it expects sales in China to reach 2 million vehicles this year.

The portion of the IPO which dealt with the method by which the company would raise money:

GM said the offering will consist of 365 million shares of common stock to be sold by certain of its stockholders. The company will also issue 60 million shares of its Series B mandatory convertible junior preferred stock with a liquidation amount of $50 per share.
The estimated price range for the offering of common stock is $26.00 to $29.00 per share
Unless converted earlier at the option of the holder, each share of the Series B preferred stock will automatically convert on the mandatory conversion date, which is expected to be three years from the original issue date. The conversion provisions depend on the applicable market value of the company’s common stock, and are subject to certain anti-dilution adjustments.
The underwriters have the option to purchase from the selling stockholders up to an additional 54.75 million shares of common stock and from the company an additional 9 million shares of Series B preferred stock, on the same terms and conditions, to cover over-allotments, if any.

The yield of the offering to GM should be about $13 billion.

GM also posted its Q3 results:

Revenue was approximately $34 billion. Net income attributable to common stockholders was in a range of $1.9-$2.1 billion and earnings before interest and taxes (EBIT) of $2.2-$2.4 billion
For the first nine months of the year, GM estimates: Revenue of $99 billion. Net income attributable to common stockholders of $4.0-$4.2 billion and EBIT of $6.0-$6.2 billion

GM said that its October US  car sales were up 3.5% . The auto manufacturer reported it sold 183,759 cars and trucks, up from 177,603 a year ago. Excluding the discontinued brands, sales jumped 12.8%. That is very modest growth in what is increasingly a modest market.

GM’s problem remains that its share of vehicle sales in the US continues to fall and is under 20% most months. The improved sales of Ford Motor (NYSE: F) and imports from Asia and Europe  make that trend likely to continue. GM would not be able to sustain interest or demand in its IPO based on the results of American operations.

China has become the key to its future and the results from the People’s Republic are already more important from those from the US

Douglas A. McIntyre

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