Even after GM, plenty of cash to go around

By Alina Selyukh and Clare Baldwin

NEW YORK (BestGrowthStock) – General Motors Co (GM.N: ) has raised billions of dollars in its initial public offering, but big investors still have plenty of cash on hand to plow into other new stock issues — if they have merit.

A successful IPO by a well-known brand like GM could reinforce investor confidence in a broad economic recovery and could spur renewed retail investor interest in IPOs, analysts and fund managers said.

“The psychological benefit of raising investor confidence can’t be underestimated,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, who helps oversee $55 billion.

GM, the maker of Cadillacs, Buicks and now the Chevy Volt, has already raised $20.1 billion. It could raise as much as $23.1 billion and eclipse Agricultural Bank of China (601288.SS: ) as the world’s biggest ever IPO if the underwriters exercise their full overallotments.

The GM behemoth has been closely watched by bankers looking to trot out other big IPOs in the coming months, including private equity-backed hospital operator HCA Inc, U.S. retailer Toys R Us and Nielsen Holdings, whose viewership ratings often determine the fate of TV shows.

GM, the top U.S. automaker and a one-time blue chip, allocated about 20 percent of its IPO — more than $3 billion — to retail investors, a source familiar with the situation told Reuters.


Twenty percent might not sound like much, but the dollar value of the GM retail placement is the largest ever, the source said.

“Most of the retail investors were left out of the GM offering,” said said Josef Schuster, founder of Chicago-based IPO research firm IPOX Schuster LLC, adding that he’s expecting interest to be particularly strong in tech sector offerings.

“I think they will see this as a positive sign to look at IPO market as an investment strategy down the road. Institutional investors have done that all along.”

Analysts and investors said fears were unfounded that the GM IPO could somehow suck up liquidity that would otherwise be destined for competing offerings.

“How much cash is sitting on the sidelines? $1 trillion, $2 trillion, $3 trillion, $4 trillion, $5 trillion? A lot,” said South Beach Capital Markets Advisory Corp President Bruce Foerster, who formerly worked as an equity capital market head at PaineWebber and Lehman Brothers. “At the right price you are going to be able to do deals.”

LPL Investment Holdings Inc (LPLA.O: ), which operates a nationwide network of independent brokers, for example, raised $470 million in an IPO that priced and debuted on the same schedule as GM. Its IPO priced at the top of the expected range and sold more shares than expected. Its shares rose 7.2 percent in their first day of trading.

“It shows depth of liquidity in the U.S. and global markets,” said Linda Killian, a portfolio manager at Connecticut-based IPO research house Renaissance Capital. “But does the success of GM mean it’s going to be easier for other big IPOs? ‘No.'”

Harrah’s Entertainment Inc, the world’s largest casino operator by revenue, may be a case in point. Harrah’s, which will change its name to Caesars Entertainment Corp and was aiming to raise about $500 million in a Thursday IPO, is now delaying its offering, a source told Reuters.

Harrah’s woes may have more to do with its own ownership structure than any kind of GM backwash, though. Hedge fund manager Paulson & Co, which injected cash into the casino operator in June, plans to sell its entire stake at the time of the IPO.

That would double the number of shares floated and may have contributed to investor skepticism about the deal, analysts say.

(Additional reporting by Soyoung Kim in New York, Kevin Krolicki in Detroit and Ross Kerber in Boston; Editing by Steve Orlofsky)

Even after GM, plenty of cash to go around