No question, the GM initial public offering is huge. But is it the biggest global IPO ever? Afraid not.
We live in inflation-obsessed times, after all, and if you look at the General Motors IPO on an inflation-adjusted basis it is at best No. 3 – and perhaps as low as No. 7, depending on how you rack up the numbers.
So says Linus Wilson, an assistant finance professor at the University of Louisana Lafayette who kindly provides the chart at right offering one take on big IPO math through the years.
Investment banks led by JPMorgan on Wednesday priced GM’s 478 million common-share offering at $33 apiece, raising $15.8 billion. The once-bankrupt car company also sold $4.3 billion of preferred shares, bringing its take to $20.1 billion.
That by some accounts is the largest first-day stock sale in history, though Wilson begs to differ. His figures will part from those typically cited because of the inflation adjustment and also because his include the proceeds raised when investment bankers exercise their so-called overallotment option, the extra shares companies give their bankers to make sure everything works out when the stock starts trading.
He says that using inflation-adjusted dollars, the biggest IPO of all time is the February 1987 debut of Nippon Telegraph & Telephone. The deal raised $15 billion at the time, but debasement being what it is the dollar has since depreciated by 49%. Thus the value of that deal in current dollars is almost $30 billion.
The second-biggest IPO by Wilson’s lights is the 1998 offering of Nippon’s wireless business, the ridiculously named NTT DoCoMo. It raised $18 billion then, which is equivalent to $24 billion now.
Coming in at No. 3, if you count the common shares and the corresponding overallotment option (the green shoe!) and the preferred stock and its overallotment, is GM, with $23 billion. But if you count only the common shares and the overallotment, GM sinks to No. 7, after three deals priced this year in Hong Kong and the 2008 offering of Visa .
While we’re at it, Wilson also notes that through its sales the government is realizing a $4.9 billion loss on its $49.5 billion investment in GM.
Here’s how that math works: Before the IPO, the government needed to sell at $44 a share to break even. Now that it has sold almost half its stake at $33, it will need to sell the rest of its stake at $53 to make taxpayers whole.
But, on the bright side, the remaining 33% stake is barely bigger than what the government held in Citi around this time last year, and Treasury has succeeded in selling off most of that. That means, knock on wood, the end could truly be in sight for government ownership of one more big company.