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GM Files for IPO; Government to Begin Selling Down Stake

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By Jason Beahm on August 19, 2010 6:56 AM

In an exceedingly rare event, General Motors has filed paperwork to go public (again). The move would allow the federal government to sell its stake in the company. It's a welcome bit of good news for a still struggling economy. The IPO could be the second largest in the history of the country. It could be as large as $10 billion to $20 billion. GM will now undergo a review by the Securities and Exchange Commission. The IPO could take place later this year.

It is a particularly unique event as the U.S. government technically owns a massive stake in GM and will soon begin selling its stake in the company. The U.S. Treasury will play a role in setting the prices for the stock. The New York Times reports that those briefed on the matter believe the Treasury will sell about one-fifth of its shares, which would bring the taxpayers' stake in GM under 50 percent. The Treasury Department, in a statement, said it "will retain the right, at all times, to decide whether and at what level to participate in the offering."

"It's certainly another step in GM's recovery, and it's a significant step because it starts to reduce the government's equity position in the company and that is the desired end result, said Rebecca Lindland, an IHS automotive analyst, "Any IPO has risks to it and this economy is not recovering very quickly, so to wait for outside forces to settle down could take a long time. You can evaluate any time and establish pros and cons.

GM is banking on investors looking favorably upon its profit through the first two quarters of the year, $2.2 billion. In the four years prior to the GM bankruptcy, the company lost $88 billion. The company hopes that this rare IPO is yet another way to turn the corner.

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