Shares of auto-lender Ally Financial Inc fell as much as 3 percent in their market debut on Thursday, taking the shine off the biggest U.S. IPO so far this year as investor appetite for big stock offerings shows signs of waning.
Ally's offering raised $2.38 billion for the U.S. Treasury, which sold 95 million shares at $25 each, the low end of the expected price range of $25-$28. At the offer price, the company was valued at about $12 billion.
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Analysts have said that investors are becoming more selective after a flood of stock offerings this year.
In this week alone, more than a dozen companies have either gone public or will make their market debuts by Friday, marking the busiest week for IPOs since 2007.
Ally's lackluster debut follows that of hotel operator La Quinta Holdings Inc , which traded most of Wednesday around its listing price.
In contrast, offerings from small biotech companies and cloud-based technology firms - which analysts say are easier to price - have fared well this year.
The Treasury, which injected $17.2 billion into Ally during the 2008 financial crisis, said on Wednesday that with the IPO it had so far made a profit of $500 million on its investment, including dividends and interest payments.
The Treasury now has a stake of 17.1 percent in Ally, down from 36.8 percent before the IPO. This will fall to 14.1 percent if the underwriters exercise an option to sell additional shares on behalf of the government.
Ally, founded in 1919 as General Motors Acceptance Corp, was a unit of General Motors Co until private equity firm Cerberus Capital Management bought a majority stake in 2006.
Burned by bad mortgage loans made by subsidiary Residential Capital (ResCap) during the housing bubble, Ally was thrown a lifeline under the Troubled Asset Relief Program (TARP).
Since the bailout, the company has been focusing on repaying the government by putting ResCap into bankruptcy, reducing expensive debt and selling assets.
Ally and other auto-financiers are benefiting from rising U.S. auto sales. U.S. auto sales are widely expected to rise by around by 1 million in 2014 from 15.6 million in 2013, making this year the best for automakers since 2007.
Ally initially filed for an IPO in March 2011, but delayed its plans several times due to market conditions and due to its exposure to fines over ResCap's mortgage lending.
Activist investor Daniel Loeb's hedge fund Third Point LLC and Cerberus Capital Management did not sell any shares in the IPO. Third Point has a 9.5 percent stake in Ally, while Cerberus has 8.6 percent.
Detroit-based Ally's shares were changing hands at $24.55, down 1.6 percent, after about 50 minutes of trading on the New York Stock Exchange. Almost 12 million shares had traded, making it the heaviest traded stock on the exchange.
Citigroup, Goldman Sachs, Morgan Stanley and Barclays were the lead underwriters for the offering.
(Editing by Savio D'Souza and Ted Kerr)