DETROIT — Fueled by strong investor demand, General Motors is setting a higher share price for Thursday’s initial public stock offering. The increase boosts the automaker’s market value to $50 billion and moves its largest owner, the U.S. government, closer to recouping all the money it spent saving GM from ruin.

But even with the increase, GM’s value is still short of what the government needs to recoup the whole bailout.

During the past two weeks, investor interest in GM has risen as the company’s executives flew across the globe making sales pitches to big investors. The company has made profits for three straight quarters and thinks earnings could increase even more if the U.S. auto market rebounds from a 30-year low last year.

Demand for GM stock is so heavy that one person briefed on the IPO said orders are seven times the number of common shares that are up for sale.

GM announced Tuesday that it would raise the price range for common stock being sold this week to $32 to $33 per share, up from the range listed two weeks ago of $26 to $29.

At $33 apiece, the total value of the 1.5 billion outstanding GM shares would be nearly $50 billion, up $6 billion in the last two weeks. That’s a huge improvement, but still short of the $65.6 billion market value needed for the government to get back all of the taxpayer dollars it used to get GM through a bankruptcy restructuring.

The government, which became GM’s biggest shareholder when it gave the automaker $50 billion to get through bankruptcy, hopes to get the money back through the IPO and several follow-up sales that could take two or more years.

The share price increase and the rising market value are good news, though, because they reduce the amount of money the government has to earn back in the follow-up sales after the IPO, said Joe Phillippi, president of AutoTrends Consulting in Short Hills, N.J.

“If GM performs as expected, the stock will steadily improve in valuation,” rising to $45 or more in the next year, he said.

Bankers handling the GM stock sale, which is planned for Thursday, are likely to exercise an option to sell 15 percent more shares from the government and two of GM’s other owners, the combined Canadian and Ontario governments and a union health care trust fund. That could bring in even more money.

At the high end of the new price range, $33 per share, the government could reap as much as $10 billion in the IPO. That’s $2.3 billion, or about 31 percent more than it would have made two weeks ago.The Detroit automaker, just 16 months out of bankruptcy protection, also said Tuesday that it will now sell 80 million shares of preferred stock for $50 each, up 20 million shares from two weeks ago. It will use that money to make payments on its pension and retire debit.

 

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