Thor Dealer Inventory Financier Ally Filing IPO
The former finance arm of General Motors said today (March 31) it is preparing an initial public offering as it seeks to repay billions in government aid received during the financial crisis, Associated Press reported.
Ally Financial Inc. said in a filing with the Securities and Exchange Commission that the IPO could raise up to $100 million, but the actual offering will likely be larger. The preliminary estimate of proceeds often changes closer to the IPO date as the offering is pitched to investors.
GM itself is an example of the possible change in amount: When it announced plans to go public to pay money back to the government after being bailed out, it also said it would sell up to $100 million worth of common stock in its initial filing. The IPO in November raised $23.1 billion.
“We’re talking about a number that could vary dramatically,” said Scott Sweet, a longtime analyst of IPOs and founder of IPO Boutique. “GM started at a number that wasn’t even remotely close to where it ended. That’s likely the same situation here.”
Ally will not receive any proceeds from the IPO.
Ally, formerly known as GMAC Inc., makes loans to GM customers and finances wholesale financing and retail financing for all RVs. The government first bailed out Detroit-based Ally in late 2008 as part of the Bush administration’s assistance to the U.S. auto industry. The Obama administration invested additional sums in May and December 2009.
In total, Ally received $17.2 billion in government support. It has already returned $4.9 billion through dividend payments and trust preferred securities sold earlier this month. The Treasury Department now owns 74% of Ally’s stock.
Ally did not say how many shares the government would sell in the IPO or when the offering would happen. Similarly, Treasury officials didn’t provide details about how much of its holdings would be sold initially or when the IPO might be held. The agency said in a statement that it supported Ally’s move to launch the IPO.
In addition to its holdings of common stock, Treasury also owns $5.9 billion in preferred stock, which are convertible into common stock. For the Treasury to break even on the $17.2 billion in support it provided Ally, it will have to sell the preferred stock for the $5.9 billion it is valued at and realize approximately $6.4 billion from the sale of the common stock.
Citi, Goldman Sachs, J.P. Morgan and Morgan Stanley are managing the IPO.