The Missed Opportunity in the GM IPO

GM has announced that it will up the base price range by $4 and sell 30% more shares in its IPO scheduled for tomorrow.  The company’s struggle to find the right price and sell the right number of shares suggest a missed opportunity.  The largest IPO should have been run as a reverse Dutch auction, not though a traditional underwriter syndicate using 35 investment banks and two lead underwriters.  As I write this, GM and Morgan Stanley are huddled in a room trying to figure out the correct price and correct volume.  A reverse Dutch auction, in which anyone can bid for any amount at any price, with the seller choosing the amount to sell based on the number is could sell at any given price (the lowest price accepted is everyone’ s price) would minimize the price uncertainty. given the size of the IPO it is highly likely that GM will “leave less cash on the table” in an auction than in a traditional underwriting.  Moreover, all those in the American public who wanted to bid, could.  At present the American public is largely shut out of the initial placement and must buy in the secondary markets from the initial purchasers.  The public paid to carry the company, which became theirs, and anyone in the public should be able to buy shares in the company.

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