How to value the new shares?
Late Friday in an SEC filing, General Motors Company said that it will make its initial public offering of stock by July 10 of next year, or one year after its emergence from bankruptcy protection by a Federal Court in New York. In the interim CEO Fritz Henderson is being paid $105,000 a month starting back in January of 2009.
The filing contained no financial results for the second quarter, and the company said they would not be provided until after the third quarter of this year.
Sales declined 19% in the U.S. in July and, with the exception of Asia, GM is struggling to hold marketshare globally. How the company is performing is critical to the valuation of the shares issued, but the lack of public financial data that conforms to generally accepted accounting principles will make an assessment difficult for outsiders. GM is a private company and therefore not subject to the same filing requirements as publicly held companies under the Securities Exchange Act of 1934.
“Today’s disclosures are consistent with our commitment to remain transparent and to keep the public informed of our progress,” said Fritz Henderson, GM president and CEO in a statement.
The company will continue to file “certain information” with the SEC about material business matters, as well as provide certain disclosures about the company’s financial status and key indicators of the company’s progress.
The company is now authorized to issue 2.5 billion shares of common stock, an order of magnitude higher than the old number of common shares outstanding, which finished trading at less than $1 per share.
Ron Bloom, the head of the Auto Task Force said last week that the government was in no hurry to sell its stock in new GM; instead it will balance the potential return with the $65 billion taxpayers have invested so far to keep GM solvent. Since it is the largest private shareholder in the new company with approximately 60% ownership, what the U.S. Treasury does during and immediately after the IPO could drastically affect the value of the shares.
The U.S. Treasury is holding more than 304 million shares of stock; Canadian governments hold more than 58 million shares, and the UAW health care trust holds more than 87 million shares. The success of the IPO is critical for the continued funding of health care.
In another section of the filing, GM said that on July 20, 2009, Directors Akerson, Bonderman, Krebs and Russo were designated to the board by the U.S. Treasury according to the terms of the Stockholders Agreement dated as of July 10, 2009 by and among General Motors Company, the U.S. Treasury, the UAW Retiree Medical Benefits Trust and 7176384 Canada Inc (“Canada Holdings”). Director Stephenson was designated to the board by Canada Holdings.
Each member of the board who is not an employee of General Motors Company will be paid, in cash, an annual retainer of $200,000 for service on the board and, if applicable, one or more of the following annual retainers: ($10,000 for service as chair of any board committee; $20,000 for service on the audit committee of the board; and $150,000 for service as the Chairman of the board. In addition, until August 1, 2009, the members of the board may be reimbursed for taxes related to income imputed to them for the use of company cars provided to non-employee directors.