DETROIT — This week, General Motors' stakeholders will see some cash. Finally.
If all goes as planned, GM will price its initial public stock offering on Wednesday, and the stock will hit the market on Thursday morning with new owners.
As trading begins, owners such as the U.S. Treasury will walk away with billions of dollars in exchange for releasing their GM stock to the public.
But that doesn't include GM bondholders — many of whom chose to support the home team years ago through their investment portfolio.
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During GM's bankruptcy last year, the bondholders were given a 10 percent stake in the new GM. But they won't receive the shares until the liquidation of the cast-off portion of the old GM that is still in bankruptcy. That's expected to take three to six months, according to an insider from a firm that's a major bondholder. Until then, GM's bonds will continue to trade.
"I've been holding them for years. What's another couple of months?"
That's the strategy Frank Drew says he's using for his General Motors bonds. The bonds, with a face value of about $150,000, are now trading at about a third of their original value. But once the part of the old GM still in bankruptcy is liquidated, Drew, of Northville, Mich., will get GM stock. His bonds will be put into a pool with about $37 billion worth of bonds and other unsecured claims, and 10 percent of GM's 1.5 billion common shares will be issued to bondholders proportionately to the value of their bonds.
That stock will be Drew's to do with as he wishes — just as it will be for the buyers of GM's stock when it hits the market Thursday, 16 months after the company exited Chapter 11 bankruptcy.
And everyday Joes like Kris Trexler are eager to get a piece from the stock's first public owners.
Trexler, a Los Angeles film and video editor, said he cried when he turned in the EV1 electric car that GM canceled a decade ago. He's now one of the consumer advisers testing a Chevrolet Volt for three months — and he already has a Volt on order for when the test ends.
"After driving this car...I can't think of any reason I wouldn't buy some stock," Trexler said. "This company is back, and they've proved it to me."
GM is planning to sell up to 419.75 million common shares and 69 million Series B preferred shares to hedge funds, money managers and long-term investment firms. Those firms will then trade the stock on the New York and Toronto stock exchanges.
The automaker set a target range for the common shares at $26 to $29 each, but GM is expected to raise that range early this week by no more than a few dollars, according to two sources familiar with the situation. As executives finish their road show presentations to investors in North America and Europe, they're gauging the interest of the all-important long-term investment firms. GM needs those firms to hold stock for months, or even years, to keep it stable.
By all accounts, demand for GM stock is strong, likely enough for every possible share to sell, and recent strength in the stock market can only help.
Probable buyers include GM's Chinese automaker partner SAIC and investment funds from the Middle East.
That could create controversy for the IPO's largest seller, the U.S. Treasury, which is planning to use the sale to lower its stake in GM from 60.8 percent to slightly more than 40 percent. The Treasury has said that some foreign investors would be allowed, but consumer advocate and former presidential candidate Ralph Nader co-signed a letter last week to President Obama, urging him to suspend the IPO, partially because of the need to keep investment in the U.S.
Nader was also concerned that the government plans to sell part of its stake at a loss. The government needs to average $43.67 a share to break even on its $50 billion investment in GM, above the likely range. The Treasury is hoping GM's stock will grow in value over the coming months and years so it can make more money when it sells the rest of its shares.