Automaker's Shares Jump in Early Trading as Investors Buy GM Stock Following Record IPO

[Editor's Note: If you'd like information on potential GM stock investing strategies, check out a special report that ran in Money Morning earlier today by clicking here.]

Shares of General Motors Co. (NYSE: GM) zoomed nearly 7% in morning trading today (Thursday), following a $20.1 billion initial public offering (IPO) that moves the U.S. carmaker closer to paying back the taxpayer funds it received in a bailout last year.

GM shares were up $2.25 each, or 6.82%, to trade at $35.25 at noon today, in the firm's first trading session as a newly public company, according to Google Finance.

GM's offering of $4.35 billion of preferred shares and an overallotment option could boost the total amount raised to $23.1 billion – making it the largest IPO in history. Still, GM stock would have to rise considerably for the company's stakeholders – which include the U.S. Treasury, United Auto Workers union (UAW), and Canadian government – to recover their investments in the company.

The IPO will return as much as $13.6 billion of the U.S. Treasury's $49.5 billion investment, slashing the government's stake in the company to 37% -- 33% with the overallotment provision – from 61%.

The offering's underwriters – which include JPMorgan Chase & Co (NYSE: JPM), Morgan Stanley (NYSE: MS), Bank of America Corp. (NYSE: BAC), and Citigroup Inc. (NYSE: C) – have 30 days to exercise the overallotment option. The option would increase the number of shares offered by the Treasury by 14.3 million.

The Treasury offered about 360 million shares in the IPO at a value of $33 a share. That means it will have to sell its remaining shares at an average of $53 to recoup its entire investment.

Still, at $33 a share, the IPO priced higher than initially expected and generated a significant amount of investor interest, paving the way for a government exit. 

"General Motors' initial public offering marks a major milestone in the turnaround of not just an iconic company but the entire American auto industry," said U.S. President Barack Obama. "Through the IPO, the government will cut its stake in GM by nearly half, continuing our disciplined commitment to exit this investment while protecting the American taxpayer."

Shares of GM rose $2.50, or 7.6%, in morning trading to $35.50.

Money Morning Contributing Writer Jack Barnes said in a special report this morning that investors should consider buying GM shares at a value under $35.

The company that is being brought back to the market is better prepared to be an international manufacturing powerhouse than its pre-bankruptcy predecessor," said Barnes. "Will it be the largest or the best ever again? I don't believe so.  However, that does not mean it won't be a successful equity investment for a patient investor."

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Automaker's Shares Jump in Early Trading as Investors Buy GM Stock Following Record IPO