General Motors Co.'s (GM) stock declined nearly to its IPO price on its second day as a public company Friday before clawing its way toward a slight gain in the afternoon.
The automotive company's swings came after its initial public offering eked out a 3.6% gain on its debut Thursday. In early trading Friday, the shares drifted as low as $33.11, just a breath above its IPO price of $33; it recently rose as high as $34.31, above its first-day close of $34.19.
Analysts and market observers said that the U.S. government's push for the maximum proceeds possible from the offering left little room for significant trading gains, and the stock would likely remain in a narrow range over the short term.
Underwriters likely supported the stock by buying it near lows, and mutual funds seeking to add to their allocations helped keep the stock from going below its issue price, said Josef Schuster, founder of IPOX Schuster, a financial-services firm specializing in IPO products such as indexes.
"I think it's going to trade in the range of $33 to $35 in next week or two," said Schuster. "It was priced high, and from a valuation perspective, in the absence of any fundamental news, there's nothing happening to drive it much higher."
Earlier this week, underwriters raised the number of common shares in the offering to 478 million from 365 million, and boosted its price range to $32 to $33 from $26 to $29, ultimately raising $15.8 billion through the common shares in its offering, or 50% more than expected.
Bankers normally price an IPO at a discount of 10% to 15% to attract buyers. But GM had strong demand heading into this week, and its majority shareholder, the U.S. Treasury, pushed for the highest return possible on an investment it made with taxpayer dollars.
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