General Motors Co. and its Wall Street bankers are setting aside 5 percent of the shares to be sold in next month's initial sale of stock for GM's employees, car dealers and retirees.
That detail was included in a regulatory filing on Thursday that also spelled out a new compensation plan for board members, gave a warning about auto sales and a noted a conflict of interest involving one of GM's IPO bankers.
As for the shares being set aside, GM's employees, dealers and retirees have until Oct. 22 to sign up to buy them at the IPO's initial price, which is expected to be around $20 apiece. They must invest more than $1,000 to participate. IPO analysts say GM needs to get a strong showing of interest from employees, retirees and dealers to help sell the stock to big investors as well as individuals.
GM's employees and retirees total about 600,000 in the U.S. and Canada, and the company has nearly 5,000 dealers in the two countries.
GM, once among America's largest publicly traded companies, is selling its shares in the market again after a massive restructuring in bankruptcy court last year that wiped out its old stockholders.
The company, which had lost billions, needed a $50 billion government bailout to survive the transition. Now its largest owner is the U.S. government, which plans to sell part of its stake in an initial public offering.
An IPO date and share price have not been set officially, but Chairman Ed Whitacre has said that GM's common stock will be priced between $20 and $25 a share when it is sold to the public sometime in November.
The price may be low enough to lure smaller investors. Potential buyers have seen GM make $2.2 billion in the first half of the year, but they need to be convinced that the automaker can overcome its past mistakes and that U.S. auto sales will accelerate from historic lows last year.
GM's shares have been valued by a government bailout watchdog at $133.78 apiece. So the company will have to issue more shares before the IPO to bring the price down to the $20 to $25 range. The move, called a split, would give shareholders roughly five to seven new shares for every share they now own.
Like other investors, GM employees, dealers and retirees can sell their shares in the stock market after the IPO.
The U.S. government plans to sell a portion of the 304 million shares it got in exchange for the bailout money. It could take years and several follow-up sales for the government to unload all its shares and recoup about $43 billion that GM still owes.
GM's other shareholders the Canadian and Ontario governments, a union health care trust fund and GM's old bondholders also can sell shares in the initial stock sale. Just how many shares each owner intends to sell has not been made public.
U.S. and Canadian regulators still must sign off on the stock sale plan, which is under review. Once regulators accept it, GM will go on a two-week worldwide "road show" to officially start wooing larger investors such as mutual, hedge and pension funds. Shares also will be offered for individual investors.
GM will sell no common stock itself, but plans to offer preferred shares, which pay a dividend.
Morgan Stanley and JPMorgan Chase are the lead underwriters for GM's IPO.
GM also warned in its filing with the U.S. Securities and Exchange Commission Thursday that auto sales in some markets, including North America, have been recovering slowly. The recovery may not continue or spread to all markets, hurting the company's finances.
GM disclosed that its board on Oct. 5 changed the pay structure for nonemployee board members. Starting Jan. 1, they must defer half their $200,000 annual pay and take it in GM common stock. The remainder can be taken in cash or stock.
The SEC filing also noted a conflict of interest involving Citigroup Inc., which has a subsidiary serving in the group of investment banks underwriting the stock offering. Since the Treasury Department owns a 12.4 percent stake in Citigroup, the investment bank would need to get written consent from investors whose accounts it manages in order to sell shares in the offering, the filing said.
Peter Henning, a law professor at Wayne State University in Detroit who worked as an attorney in the SEC's enforcement division, said he didn't expect this to pose any problems because Citigroup is not a lead underwriter.
Associated Press Writer Ken Thomas in Washington contributed to this report.