As the much anticipated initial public offering for the new General Motors approaches, U.S. Treasury officials have reportedly voiced concerns over the potential for foreign investors to buy large stakes in the automaker, sparking them to consider limiting such investments.
The U.S. Treasury’s primary motivator for limiting foreign investors playing a cornerstone role for GM is reportedly fear of political fallout, and according to the Wall Street Journal, sources familiar with the situation say the Treasury plans to selectively limit sovereign-wealth funds to limit political fallout.
Having sovereign-wealth funds acting as cornerstone investors in major U.S. corporations is not a new idea, nor is it particularly uncommon. But unlike the case with GM, usually the corporations seek the foreign funding as a way to help stabilize the IPO and hopefully increase the sales price of the stock due to increased demand.
As is the case with GM, however, there is fear that since American taxpayers have invested over $50 billion in order to rescue the Detroit automaker, the public may not take kindly to the news that taxpayer funds ultimately helped to provide for GM to be largely taken over or controlled by a or many foreign entities.
Catch 22
The situation is a sticky one indeed, as U.S. taxpayers would be able to sell more of the stock and possibly at a higher price should there be no limits on foreign investors. That realization makes for a tough decision for Treasury officials, as they will have to choose between getting the maximum value for the taxpayer investment, or protecting it from foreign takeover.
As it stands now, it is not planned for the Treasury to unload the full supply of GM stock, which means taxpayers will still retain at least a portion of the ownership in the automaker post-IPO.
References
1.’U.S. frets over foreign…’ view
