Market capitalization/capitalisation (often market cap) is a measurement of size of a business enterprise (corporation) equal to the share price times the number of shares outstanding (shares that have been authorized, issued, and purchased by investors) of a public company.

Last week, in fact, Morningstar analyst David Whiston issued a preliminary estimate setting the shares' fair value at $134.

GM to sell most stock in U.S., split shares-sources


NEW YORK (Reuters) - Top U.S. automaker GeneralMotors Co will allocate most of the shares in itsinitial public offering to U.S. investors and plans to set ashare price low enough to attract retail investors, five peoplefamiliar with the matter said.

GM is likely to sell about 80 percent of the common sharesin its IPO and more than 90 percent of the preferred shares inNorth America, the people said. The people asked not to beidentified because preparations for the IPO remain private.

After a stock split, the shares could be priced at around$20 to $25 apiece, the sources said. That price range is seenas low enough to attract retail investors, who could accountfor as much as 25 percent of the offering, they said.

Most companies conduct a share split before their publicfloat to lower the per-share price to between $10 and $20. Thecommon practice is aimed at making the stock liquid andaccessible to retail buyers.

Before a split, GM shares would have to price at $133.78per share for U.S. taxpayers to recoup the $40 billion investedin the automaker's common stock, according to an estimateprepared by Neil Barofsky, inspector general for thegovernment's Troubled Asset Relief Program.

GM has yet to settle on the valuation for the entirecompany or a per share price range, the sources said.

GM and the U.S. Treasury have repeatedly declined tocomment on the IPO, citing securities regulations.

The Treasury said in a statement released Friday thatIPO investors would be sought across the multiple geographieswith a focus on North American investors and that the investorpool would be large and diverse.

The U.S. government used $50 billion of taxpayer money tohelp GM through a government-assisted bankruptcy. GM has repaid$6.7 billion of that amount that had been held in debt.

GM avoided liquidation and the Treasury took a 60.8 percentstake in the automaker, which it plans to begin exiting byselling shares in the IPO.

GM needs to have a market valuation of about $67 billion ifU.S. taxpayers are to break even on the common stock the Treasury still holds. That excludes the $2.1 billion inpreferred stock also held by the government.

An IPO price of about $20 per share would imply a roughly7-1 stock split ratio.

But IPOs typically price at a discount of 10 percent to 15percent to theoretical fair value to reward investors fortaking a risk on a new issue and pave the way for future stockfloats.

In GM's IPO, the discount could be as much as 20 percentcompared with the U.S. Treasury's break-even point, two sourcespreviously told Reuters.

The value of the GM deal will not be set for weeks, but itis expected to be one of the biggest IPOs of all time,globally, with estimates ranging as high as $20 billion,sources said.

GM's early plans envisaged selling between $12 billion to$16 billion of common stock, as well as $3 billion to $4billion in preferred stock that would convert to common sharesunder a mandatory provision, a source told Reuters earlier.

As of now, the United Auto Workers healthcare trust, whichowns 17.5 percent of GM, and the governments of Canada andOntario, which own 11.7 percent, have not decided whether toparticipate in the IPO, another source familiar with thesources said Wednesday.

With the approach of U.S. midterm congressional electionsand the hefty taxpayer investment, the IPO has become apolitical flashpoint.

The Obama administration is eager to paint the autoindustry bailout and GM's IPO as a success while Republicansand other bailout critics are keen to point out problems.

The Treasury said last week it would not directly involveitself in share allocation decisions. Those decisions will beleft to an underwriting syndicate led by Morgan Stanley,JPMorgan, Bank of America Merrill Lynch and Citi. (Reporting by Soyoung Kim and Clare Baldwin in New York, KevinKrolicki in Detroit and Philipp Halstrick in Frankfurt)