Automaker Chrysler reportedly expects to file for an IPO this week, and given the industry’s success this year — General Motors (GM) and Ford (F) and, of course, Tesla (TSLA) are all enjoying market-beating returns — the offering should go over well.
However, the timing on the Chrysler deal is a bit surprising, as most of the buzz targeted an offering sometime in 2014. This change in time table is the result of a dispute among the key shareholders, according to Financial Times.
Fiat (FIATY), which has a 58.5% stake, has tried to purchase the 41.5% stake from the United Auto Workers’ voluntary employees’ beneficiary association (Veba), whose ownership stake came about because of the federal bailouts. A buyout would give Fiat a nice boost in cash flows, and also allow it to consolidate operations and technology systems — moves that would be crucial in competing against global rivals.
However, both sides have not been able to meet at an agreeable price. Veba wants a cool $10.3 billion for its stake, while Fiat seems to think a more reasonable amount is around $4.2 billion.
The solution? With a gaping hole between the bid and the ask price, Chrysler will issue a portion of Veba’s stock to the public.
I think this is a shrewd move. What better way to peg your value on the stake than by testing the public markets?
However, given this tactic, an IPO might not even occur. You see, as Chrysler goes on its road show (which could happen as early as November), the company will begin to get a pretty good sense of its valuation via the banking community.
That will leave much less room left for negotiation — and should make it easier for both Fiat and Veba to come to some sort of deal.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.