The recent high levels of IPO activity show no signs of slowing with ten deals scheduled on the US IPO calendar for this week. The diverse group includes high-profile deals such as Caesars Entertainment (CZR), the world's largest casino entertainment provider, consulting company Booz Allen Hamilton (BAH) and General Motors (GM).
General Motors is the world's second largest automaker with 7.5 million vehicles sold in 2009 and operations in over 120 countries. Through its 2009 bankruptcy, GM shed $93 billion in liabilities and a bloated North American cost structure that had resulted in years of red ink and deteriorating product quality. While industry volumes remain well below peak levels, a newly-installed management team has positioned the company to break even at the bottom of the cycle, thanks to a cleaned-up balance sheet, lower headcount and a smaller manufacturing footprint. GM is on pace to deliver its first profitable year since 2004, and it is speeding toward a $10 billion IPO later this week, currently scheduled to price Wednesday for trading on Thursday. Morgan Stanley (MS), J.P. Morgan (JPM), BofA Merrill Lynch (BAC) and Citi (C) headline a long list of underwriters on the IPO, which is expected to be one the five largest ever to list on a US exchange. It would also represent more than 50% of all US proceeds raised year to date ($18 billion).
While much attention has been given to GM's U-turn in its North American operations, its leading 13% share in emerging economies (Brazil, Russia, India, China) adds a compelling secular growth angle to this story. Through joint ventures with leading OEMs SAIC Motors, Wuling and FAW the company continued to build on its top 13% share in fast-growing China, which has overtaken the US as the world's largest auto market by volume. The success of recent model introductions, such as the Chevrolet Equinox, GMC Terrain, Buick LaCrosse and Cadillac SRX, should help GM halt a three-year decline in US market share, and management sees considerable earnings and cash flow upside as industry volumes recover. On the other hand, GM plans to devote considerable financial and management resources to restructure its unprofitable European segment, and the large post-IPO ownership stake of the US Treasury and UAW is a concern from both a corporate governance and aftermarket trading perspective.
Nonetheless, reports that the deal is already heavily oversubscribed suggest that investors like the asking price at $26 to $29 per share, and with Ford trading near its 52-week high, GM appears revved up for a return to the public markets.