RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

Taxpayers could profit on pre-owned GM
(Reuters) - When GM was sputtering toward collapse last year, it was hard to see how the U.S. auto market leader could keep selling cars -- let alone how it could one day sell itself as a success story to investors.

Deals

But almost a year after emerging from an unpopular government-funded bankruptcy, GM is driving toward a stock listing that could deliver a paper profit to U.S. taxpayers and an important political win for the Obama administration.

Analysts estimate that a GM initial public offering could value the company between $70 billion and $90 billion -- above the peak of the automaker's market value near $60 billion in 2000 when it was riding high in a booming market for SUVs.

GM and the U.S. Treasury are now readying an initial public offering of GM stock that would reduce the U.S. government's nearly 61 percent ownership stake.

The Treasury, which has hired Lazard Ltd (LAZ.N) as adviser on the IPO, said on Thursday it expected to sell part of its stake when GM goes public as early as the fourth quarter.

JPMorgan Chase & Co and Morgan Stanley are set to be named underwriters for the GM deal, a source told Reuters on Friday.

Figuring out how investors will value the new GM is tricky, but analysts say trading in bonds issued by the pre-bankruptcy automaker and a comparison with its closest rival, Ford Motor Co (F.N), underscore the surprising scale of its turnaround.

Any equity value for GM above $70 billion will result in a paper profit for the U.S. Treasury, which poured more than $50 billion into GM and retains a 60.8 percent ownership stake.

"Everybody will look at this valuation as a sign of success for this corporation and the bailout," said a person who has worked with the Obama administration's autos task force, but who was not authorized to discuss the matter for attribution.

Based on bonds issued by the old GM, the new GM could be worth as much as $88 billion after going public again.

The $27 billion in bonds issued by the pre-bankruptcy GM represent a 10 percent equity stake in the new company under the terms of the restructuring negotiated by the White House.

The old GM bonds have been trading at between 31 cents and 32.5 cents on the dollar this week as talk of an IPO heated up. That represents an implied equity value of between $8.4 billion and $8.8 billion for bondholders and up to $88 billion for the whole company.

A valuation for GM at the high end of that range would also mean taxpayers could be sitting on unrealized profits of about $10 billion on the government's stake in the automaker.