Patrick Rall's picture

Chrysler Files for IPO - Looks to Go Public with UAW Shares

The Chrysler Group announced this morning that the company has filed with the US government to issue an Initial Public Offering – marking the first step towards the company being publically traded in a similar manner to General Motors or Ford Motor Company.

For our Chrysler loving readers who aren’t “up” on the world of stock trading, an Initial Public Offering – generally referred to by the acronym IPO – is basically a company’s way of telling the United States government that they want to begin offering shares for sale on the open stock market. In the US, the Security and Exchange Commission (SEC) oversees all stock market dealings to ensure that everything is on the level so whenever a company intends to begin offering shares of their stock to the general public, they are required to file a registration statement with the SEC. It should be noted that this is only the first step towards the Chrysler Group become available on the open stock market and the company’s press release stresses the fact that today’s announcement doesn’t guarantee that anything will happen but those Americans who have been looking to invest in Chrysler stock – your time could be coming.

Since this is only the filing for the Initial Public Offering, Chrysler has offered any detail as to how many shares could be made available on the public market nor have they announced any sort of pricing per share of company stock. However, the Chrysler Group announcement did include the key fact that the shares being offered up for public consumption do not come from Fiat’s portion of ownership. Instead, the Chrysler Group intends to sell share from the 40% owner by the UAW Retiree Medical Benefits Trust (the "VEBA Trust"). The move to go public by selling the VEBA Trust ownership has been requested by the UAW, presumably for the group to sell off all of that company ownership without selling that portion of stock to Fiat. Fiat management has been hard at work for months now as they tried to come to terms with the UAW VEBA Trust for Fiat SpA to buy the final 40% of Chrysler that the Italian automaker doesn’t already own and with those talks stalling – it seems that the UAW wants to be rid of that stock via a public sale. Speculations around the industry suggest that roughly 16% of Chrysler ownership could be headed for the public market and provided that the sale goes as planned – this stock should bring about $100 million US dollars.

The upside for Fiat SpA organizing this IPO to sell the VEBA Trust shares is that the company will have effectively removed the UAW’s ownership of the Chrysler Group. The downside for Chrysler and Fiat is that all of the proceeds of the IPO will go to the VEBA Trust rather than financially benefitting the automaker but considering Fiat’s difficulties in dealing with the American autoworkers labor union, the company would likely be more than happy to see the UAW sell off any of their ownership.

Should the US government Security and Exchange Commission give the Chrysler Group IPO the green light, the company would then need to set an IPO date and determine just how many shares of Chrysler stock will be offered to the open market. From there, JP Morgan Securities LLC (the company handling the IPO) would establish an IPO price at which the stock would open on the first day and from there – the market would determine the price and value of Chrysler common stock.

General Motors went through the IPO proceedings back in November 2010 and GM common stock opened at $33 per share. That IPO brought General Motors roughly $20.1 billion USD but considering that the Chrysler Group is significantly smaller, we can expect there to be far fewer shares available via the IPO and in terms of pricing – I am an automotive journalist and not a stock market specialist so your guess on the IPO price would be as good as mine.

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