Treasury: GM in charge of their own IPO

The U.S. Department of Treasury said on Thursday that GM would handle all the major decisions involving its initial public offering of stock in the newly restructured company. They also said that the IPO would not happen before October at the earliest. GM has consistently said they wanted to go public before the end of 2010.

GM and the Treasury have been conducting a search for the Wall Street bank that will manage the IPO, which may be one of the largest such sales ever. Treasury said that while the sale will likely include shares from GM, itself and other shareholders, the size and exact participants have not been determined.

The selection of the lead underwriters will be made by GM, “subject to Treasury’s agreement that the selection is reasonable,” the agency said in a statement. “Treasury will determine the fees to be paid to the underwriters.”

Analysts have estimated that GM’s shares could be worth between $40 billion and $60 billion once the IPO launches. But GM executives have said the company must clear several hurdles before any share sale, including a few quarters of profits and sorting out a long-term answer for a financing arm, which could entail either buying back portions of the old GMAC or setting up a new company.

The federal government has $50 billion invested in the new company, secured by shares of stock once they go public. Some government-owned stock will be involved in the initial IPO, but once the market sets a stable value for the stock the government will then have to slowly sell off its equity share in order to avoid depressing that value.

The more consistently profitable GM is over the next couple years, the more valuable the stock will be and the more likely that taxpayers will be repaid for the entire investment.