The United Auto Workers health care trust and the governments of Canada and Ontario may not participate in General Motors Co's GM.UL upcoming IPO in order to avoid taking a cut on the price of their shares, three people with knowledge of the matter said on Friday.
If GM's second and third largest shareholders opt to hold their shares beyond the IPO, that would leave the Treasury as the only stakeholder selling shares and could mean that the total value of the deal could be at the low end of market expectations.
The U.S. Treasury is still aiming to sell at least 20 percent of its stake in order to become a minority shareholder in the top U.S. automaker, five people familiar with the matter said.
The UAW's trust fund for retiree health care -- known as the VEBA -- and Canada together hold just under 30 percent of GM common stock as a result of the automaker's restructuring in a U.S. government directed bankruptcy in 2009.
Both VEBA managers and Canadian officials have raised the possibility of waiting until follow-on stock offerings in order to avoid offering the hefty discounts typically required for initial offerings, the sources said.
All of the people with knowledge of the discussions asked not to be named because preparations for the deal remain private and tightly controlled by U.S. securities laws.
IPOs are typically discounted 10 percent to 15 percent from theoretical fair value to reward investors for taking a risk on a new issue and pave the way for future stock floats.
In GM's IPO, the discount could be as much as 20 percent, sources have said. By comparison, follow-on offerings are typically priced just 3 percent to 7 percent below market.
