NEW YORK (AP) — General Motors stock began trading on Wall Street again Thursday, signaling the rebirth of an American corporate icon that collapsed into bankruptcy and was rescued with a $50 billion infusion from taxpayers.
The stock rose sharply in its first minutes of buying and selling, going for nearly $36 per share — almost $3 more than the price GM set for the initial public offering. The stock pulled back slightly by early afternoon and closed at $34.19. It had traded for less than a dollar when the old company filed for bankruptcy last year.
On the floor of the New York Stock Exchange, a crowd eight deep jostled around the company's trading post, adorned with its familiar blue-square logo with an underlined "GM." CEO Dan Akerson rang the opening bell as raucous cheers went up and the sound of a Chevrolet Camaro's revving engine echoed through the room.
The government hopes that the stock offering will be the first step toward ultimately breaking even on the bailout. For that to happen, the government needs to sell its remaining GM holdings for an average of roughly $50 a share over the next several years.
Ron Bloom, the Obama administration's senior adviser for the auto industry, refused to predict whether taxpayers would get all the money back.
"We're obviously eager to get the rest of it back as much as we can," he said Thursday.
The GM IPO could wind up as the largest in history. Earlier this week, GM raised the high end of its initial price range from $29 to $33 and increased the number of shares it was offering from 365 million to 478 million common shares because investor demand was so high. Counting preferred stock issued by the company, the deal's value could top $23 billion.
At midday, 264 million GM shares had been traded, more than half the number sold in the IPO.
Such volume is not unusual following a high-profile offering. It's a sign that big institutional investors such as mutual and hedge funds are taking profits and smaller investors who were shut out of the IPO are now buying, said David Whiston, an auto equity analyst with Morningstar Inc.
"Often the way the world is, the Wall Street institutions get in at the lower price and the Main Street investor gets in at the higher price," he said.
The increased selling price, though, means the market is judging the GM rescue as a success, Bloom said.
"Almost $20 billion in private capital voted that they wanted to be part of General Motors. So we do think this is a good day," he said.
In the initial offering, the government reduced its ownership stake from 61 percent to about 36 percent. The federal treasury sold 358 million shares of the resurrected GM — which is smaller, profitable and cleansed of most of its debt. If bankers exercise options to buy and resell more shares, the government will wind up selling more than 400 million shares, reducing the stake to 33 percent of GM.
"There's a lot of work to do, but today is the beginning of the new company," said Mark Reuss, GM's North American president.
The reduced government stake should help repair the company's image, which had been tarnished by accepting the bailout money, Akerson told reporters.
"They have taken their ownership down by roughly half," he said. "I would say that the average taxpayer in the United States would look at this particular transaction as very positive."
The stock offering is the latest in a series of head-spinning developments over the past two years for the American corporate icon.
In September 2008, to mark its 100th birthday, GM celebrated in the grand three-story atrium on the ground floor of its Detroit headquarters.
Two months later, then-CEO Rick Wagoner found himself in front of members of Congress, begging for money to keep GM alive. Four months after that, he was ousted by President Barack Obama.
By June 2009, GM had filed for bankruptcy. It emerged with 92 percent of its debt erased, but the company was mostly owned by the government and saddled with a damaging nickname: "Government Motors." The value of its old stock was wiped out, along with $27 billion in bond value.
Now GM is a publicly traded company again with the familiar stock symbol "GM." Obama on Wednesday said GM's IPO marks a major milestone not only in the turnaround of the company, but of the U.S. auto industry.
Most of the new stock will go to institutional investors, not to everyday investors, following a Wall Street system that rewards investment banks' big customers. GM set aside 5 percent of its new stock for employees, retirees and car dealers to buy at the offering price. The company has not revealed how many people took the offer.
Early Thursday, GM's main joint venture partner in China, SAIC Motor Corp., said it has bought a nearly 1 percent stake in GM, buying shares being offered in the IPO at a cost of nearly $500 million. SAIC, based in Shanghai and run by the state, said the share purchase is meant to enhance its cooperation with GM in China, the world's biggest auto market.
Chief Financial Officer Chris Liddell said there was high interest from sovereign wealth funds, which are pools of money from reserves of foreign governments. In the end, 90 percent or more of the shares were sold in North America, he said.
About $4 billion worth of shares went to smaller retail investors, the most of any IPO in history, Liddell said. But many retail investors are high net worth clients of Wall Street brokerage houses.
Hedge and mutual funds are now among the company's larger shareholders, GM said.
Senior Obama administration officials said Wednesday that the Treasury Department sought a balance between getting a return for taxpayers and exiting government ownership as soon as practical.
The government has agreed that it will not sell shares outside the IPO for six months after the sale. The officials, who spoke on condition of anonymity, said they would assess their options for selling the government's stake further.
In the stock offering, the government made $11.8 billion by selling 358 million shares at $33 apiece. It stands to make $13.6 billion if bankers exercise options for 54 million more.
The government would still have about 500 million shares, a one-third stake. It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even.
The government's strategy in retaining shares is to wait for GM's finances to improve and push the stock price up the next couple of years.
The total bailout was $50 billion. GM has already paid or agreed to pay back $9.5 billion. That comes from cash and preferred stock held by the government.
Reuss said he knows there's pressure to keep performing well and boost the stock price.
"I can't control share prices," he said. "I'll just go right back to designing and building and selling the world's best vehicles. That's what we can control."
The GM debut comes when auto stocks are performing well generally. The stock of GM's crosstown rival, Ford, has risen steadily this year, from about $10 in January to about $16.50 as the GM IPO approached. The stock traded for a dollar in November 2008. Ford never took bailout money.
As for GM, whether bankruptcy fixed the company remains a question, but it is far healthier in its new form. The company closed 14 of its 47 plants, shuttered or sold its Hummer, Saturn, Saab and Pontiac brands, and slashed its debt from about $46 billion to about $8 billion.
Union retiree health care costs are now the United Auto Workers' responsibility, and a controversial jobs program that paid idled workers almost a full salary has been scaled back dramatically.
GM employs 209,000 people in the United States today, down from 324,000 in 2004. Before bankruptcy, GM lost about $4,000 per car. Now it makes about $2,000 each.
AP Auto Writer Tom Krisher in Detroit and Elaine Kurtenbach in Shanghai contributed to this report.