General Motors shares get smaller bounce on 1st day of trading

GM CEO Dan Akerson, right, and other officials applaud after ringing a bell to open the New York Stock Exchange. The sounds of a revving motor followed.

Seth Wenig / AP

GM CEO Dan Akerson, right, and other officials applaud after ringing a bell to open the New York Stock Exchange. The sounds of a revving motor followed.

NEW YORK - General Motors returned to the stock market Thursday with a car show on Wall Street and a congratulatory message from President Obama, but the shares did not deliver a big surge above the price of the initial public offering.

Shares in the nation's biggest automaker closed at $34.19 in heavy trading, a 3.6 percent rise over the $33-a-share price of its offering. Investors had hoped for a larger bounce on the first day of trading for the firm, rescued last year by a $50 billion government bailout and a swift trip through bankruptcy reorganization.

Analysts said it seemed that the decision this week by GM and its underwriters to bump up the stock's target price from the $26 to $29 range had absorbed the usual first-day rise for an IPO.

"That was where the bounce was," said David Cole of the Center for Automotive Research in Ann Arbor.

The relatively small increase in the GM share price also meant that the U.S. taxpayers likely captured the best return possible in their first divestiture of what was a 61 percent stake in the company.

Too high of a jump could have left GM and the Obama Administration open to the charge that they priced the stock too low, abandoning paper profits that could have gone to taxpayers instead.

GM executives celebrated the occasion by ringing the bell to open trading on the New York Stock Exchange - and, they hoped, put an end to the "Government Motors" stigma.

"It has held us back," said Mark Reuss, GM's head of North American operations. "We know that, and we know that our competitors have certainly taken advantage of all that."

General Motors' headquarters in Detroit was dressed up for the company's return to life as a public company. GM was one of the recipients of a deeply unpopular federal bailout.

While GM was anxious to move past the bailout, Mr. Obama took the chance to defend the government's rescue of the company.

"We are finally beginning to see some of the tough decisions that we made in the midst of crisis pay off," Mr. Obama said.

The President said critics of the government's role in saving GM and Chrysler were ready to "read the American auto industry its last rites" and at least 1 million jobs would have been lost if Detroit automakers were left to fail.

"That was not an acceptable option, to throw up our hands and to quit," he said.

The GM offering set a record for the largest initial public offering in U.S. history. The entire offering is expected to reach $23.1 billion, including preferred shares and an overallotment option that will be used to take advantage of strong demand for GM's shares.

The Treasury Department sold about half of its stake and will reap about $13.6 billion once the overallotment is completed. The total government stake in the firm will shrink to about 26 percent, including preferred shares and accounting for stock options given to former GM bondholders.

The firm must wait six months before shedding more stock. The government would have to sell the rest of its ownership for about $53 a share to break even.

Shares opened strong at $35 - $2 higher than the initial public offering price - and reached $35.99 in early trading, before sliding down to the closing price.

Privately, government officials and GM underwriters said Thursday that they were relieved by the stock's trading, indicating that the shares had been valued appropriately. The goal, they said, was to establish enough of a market for GM shares to guarantee they would trade well, while maximizing the taxpayers' profits.

Besides the Treasury Department, the big sellers of stock into the offering were the United Auto Workers health-care trust and the Canadian government.

Bob King, UAW president, was there with CEO Dan Akerson when he rang the opening bell, which was followed by the sounds of a revving engine.

Buyers of the stock included mutual funds, hedge funds, and large overseas sovereign wealth funds, said Chris Liddell, GM's chief financial officer. He said that 90 percent of the shares were sold to North American investors.

GM draped a blue banner across the front of the stock exchange and displayed some of its newest vehicles on the street.

But executives tried not to celebrate too much. Mark Reuss, head of GM North America, said the firm was aware that "it has a lot of work to do" to rebuild relationships with consumers unhappy about the bailout.

"There is no victory today," he said. "The only thing we can feel good about today is that we are making progress, and the second chance we were given by the taxpayers."