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General Motors: IPO too cheap at $29 a share?

General Motors is expected to price its upcoming auction of shares near $29. But that may be too low, Barron's says.

By Reuters / November 8, 2010

Barricades block the parking lot to the General Motors now-closed Pontiac Assembly plant, which used to build full-size pickup trucks in Pontiac, Mich. The plant in Pontiac was among the 15 manufacturing plants closed during the Chapter 11 proceedings and transferred to Motors Liquidation Co. Later this month a post-bankruptcy GM is expected to start selling its shares.

Rebecca Cook/Reuters

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General Motors (GM.N) is likely to price at the high end of the $26-$29 per share range when it makes its IPO debut on Nov 17, but Barron's raises the question of whether its Wall Street underwriters are being too conservative in pricing the deal.

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The automaker's strong third-quarter results, analysts' views and the levels at which the unsecured debt of the old GM is trading could imply a price higher than the expected range, according to Barron's.

The underwriters will generate the high investor demand they seek if they stay true to form and price low, Barron's said. But such an outcome could also generate a political backlash by leaving money on the table that could have gone to taxpayers, according to Barron's.