Need for high rate may cut GM IPO size

General Motors will probably seek to raise $8 billion to $10 billion in an initial public offering in November, a smaller sale than the auto maker originally targeted, said two people familiar with the matter.

The US Treasury Department, which owns 61 per cent of GM, is more interested in fetching a higher share price to eventually recoup its $49.5 billion investment than in cashing out a bigger portion of its position, said the people who asked not to be identified because the discussions are private.

A larger deal at a lower price would place more pressure on the government to win higher prices in future offerings, the people said today. GM and its investment banks have been considering a deal as large as $16 billion, people familiar with the plans said in August.

“They’re taking a more sober view,” said Joe Phillippi, principal of AutoTrends Inc, a consulting firm in Short Hills, New Jersey. “The real question is what’s the price? There are questions in people’s minds about the market and the world’s economies.”

Chairman Ed Whitacre, who handed CEO duties to Dan Akerson on September 1, had favoured an IPO that would sell as much of the government’s position as possible, the people said. GM’s banks also sought a larger deal because it would generate higher fees.