Fall realities

GM: General Motors may be easing off the gas for its initial public offering. After weeks of talk of racing ahead with plans to raise as much as $20 billion, the deal could wind up being only half that amount, according to Bloomberg. If true, the automaker and its advisors are making a sensible move.

After all, GM is still only in the early stages of recovery. And stock markets remain choppy. That’s not the environment to try shooting for a record-size deal - especially with some $41 billion of US taxpayers’ money tied up in a 60.8 per cent stake in the Motown manufacturer. A poorly performing mega-deal would have made it even harder to recoup the cash.

It’s not just the size of the IPO that’s changing. The US Treasury also appears to have shifted its priorities. Until now, the sense was that while recovering its investment was important, the bigger concern was to quickly put a restructured GM back into private ownership. Now, though, one of the reasons cited for slashing the size of the deal is that Treasury prefers getting more cash to selling more shares.

There’s even a chance, albeit a slim one, that another goal could be missed. Much of the noise about the deal, especially from Detroit, was that Uncle Sam was supposed to sell enough shares to take its stake below 50 per cent, thus allowing GM to try to shake off the “Government Motors” moniker. With an IPO of $16 billion or more, that was a given.

But Treasury may now offload as little as $6 billion of stock, according to the Bloomberg article. If the offering prices at a discount of 17 percent or less to Treasury’s breakeven price - $133 a share - then the United States would remain the majority shareholder.

Tempering earlier ambitions might require GM and the Treasury to eat a bit of humble pie. But it would be a small price to pay. A smaller IPO, with more modest expectations, stands a better chance of success.