Ally Financial Inc., the auto lender that almost went bankrupt in 2008, has at least one thing in common with Facebook Inc. and Twitter Inc.: Its shares are surging in private trades ahead of a possible public offering.
Ally common stock gained 43 percent from Dec. 23 through Jan. 11, according to price quotes by Deutsche Bank AG. Fast-growing Internet firms backed by venture capital including Facebook have seen their combined value rise 54 percent since June, according to a December report from Nyppex LLC, a Rye Brook, New York-based firm specializing in Web startups.
The advance by Ally shows investors are growing more optimistic about the lender’s prospects after a $17.2 billion federal bailout and probably signals a successful IPO ahead, according to Reena Aggarwal, a finance professor at Georgetown University in Washington. Chief Executive Officer Michael Carpenter has said the Detroit-based company may go public this year, enabling Ally to repay the U.S.
“All indications are that the window is open for this company to go public,” said Aggarwal, who has studied IPOs for 20 years.
Ally’s shares traded at a midpoint of $10,000 on Jan. 11, according to prices from Frankfurt-based Deutsche Bank obtained by Bloomberg News. That’s up from the midpoint of $7,000 on a pricing sheet circulated Dec. 23. The stock was valued by the U.S. Treasury Department at about $10,341 a share in December, according to company filings.
Setting the Stage
Ally, formerly known as GMAC Inc., erased some of the uncertainty surrounding its future on Dec. 27 when it paid $462 million to Fannie Mae to settle repurchase claims tied to $292 billion of home loans. On Dec. 30, the Treasury said it would convert $5.5 billion of preferred shares into common to simplify the company’s capital structure.
That sets the stage for the U.S. to sell its stake, through an IPO or a sale, according to Treasury officials. The U.S. now owns 73.8 percent of Ally.
Facebook’s value climbed 56 percent to $41.2 billion from the end of June through Dec. 1, Nyppex said in a report. Twitter’s has more than doubled to $3.7 billion from $1.6 billion on June 30. Facebook is valued at $53.7 billion, while Twitter is worth $3.7 billion and LinkedIn Corp. is valued at $2 billion, according to prices on SharesPost Inc. yesterday.
Some Ally investors have turned to private markets to exit or reduce their investment in the firm, which is the primary lender to General Motors Co. and Chrysler Group LLC dealers. Investment banks like Deutsche Bank have traded the common shares over-the-counter since at least November 2009, according to an employee at another bank with direct knowledge of the transactions. The person declined to be identified because the trading is private.
Most sellers are investors associated with Cerberus Capital Management LP, which bought 51 percent of the lender from GM in 2006, according to the person. Cerberus now owns 8.9 percent of Ally after its stake was diluted by the U.S. bailouts, while third-party investors own 7.4 percent. GM and an associated trust own 9.9 percent. The number of investors in Ally isn’t publicly available.
The company has yet to file a formal prospectus with the U.S. Securities and Exchange Commission or announce the hiring of financial advisers for the IPO. Gina Proia, an Ally spokeswoman, Mark Paustenbach at the Treasury, John Dillard, a Cerberus spokesman, and Deutsche Bank’s John Gallagher declined to comment.
Private or secondary trading has allowed technology firms like Facebook, Twitter and LinkedIn to delay share offerings that would subject the companies to more disclosures and regulation. Marketplaces for such so-called secondary share trading like SecondMarket Inc. and SharesPost, which brokers trades and provides estimated valuations, have flourished in recent months.
The trading, either over-the-counter or on exchanges like SharesPost, gives investors some idea of a company’s value. The results may be flawed because the market represents just a fraction of the investors who would trade the shares if they were public, Aggarwal said.
“Any information is better than zero information but at the same time one has to be careful about liquidity,” Aggarwal said.
Ally’s IPO prospects were boosted by the success of GM’s own offering and the subsequent trading, said Jay Ritter, a finance professor at the University of Florida in Gainesville. The automaker raised more than $20 billion in November. The shares have gained about 13 percent since.
LinkedIn, the largest networking website for professionals, has hired banks to advise on an initial public offering this year, according to two people familiar with the IPO plans.
To launch a successful IPO, Ally will have to prove that it can contain liabilities tied to souring home loans, said Adam Steer, an analyst at CreditSights Inc. in New York.
“The investment climate is better now than it was six months ago,” said Francis Gaskins, president of IPOdesktop.com in Marina del Rey, California. “The general direction is good.”