Swiss bank UBS is no longer working on General Motors’ initial public stock offering because a bank employee leaked information about the sale in an unauthorized e-mail, a person briefed on the matter said Wednesday.
GM disclosed the e-mail in a filing with the Securities and Exchange Commission. UBS had been listed as a proposed underwriter in GM’s IPO until Nov. 3, when it was dropped without explanation.
The person, who did not want to be identified because the bank has not been publicly identified, declined to reveal the content of the e-mail or how widely it was distributed. GM’s filing said the e-mail went to various institutional investors.
GM also said the e-mail “does not reflect our views.”
By disclosing the rogue e-mail in an SEC filing, GM is covering itself should any investors lose money in the IPO, said Peter Henning, a law professor at Wayne State University and former attorney in the SEC’s enforcement division. Those who lost money could claim they were given bad information in the e-mail, which could be considered part of GM’s disclosures about the sale, he said.
UBS and the SEC declined to comment.
GM’s owners, including the U.S. government, plan to sell about $10 billion in common stock Nov. 18 to recoup a portion of the $50 billion bailout that saved the Detroit automaker from collapse. The company has repaid or plans to repay taxpayers $9.5 billion. The government hopes to get back the remaining $40 billion in next week’s IPO and several follow-up sales.
GM will sell no common shares but plans to sell about $3 billion in preferred stock, which pays a dividend and will be converted to common stock in 2013.
“You could understand how angry they are,” Henning said of GM executives. “If they hadn’t noticed this and the stock price dropped, they could get a lot of claims against them with people demanding their money back.”
Securities law, Henning said, gives stock buyers a “money-back guarantee” if there’s a misstatement in an IPO prospectus filed with the SEC.
GM’s disclosure limits the company’s liability, he said. It’s also unlikely that UBS or the employee would face any repercussions from the SEC, Henning said.
