GM raises the price of its IPO -- and U.S. taxpayers are the beneficiaries

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Investors are clamoring to drive away with General Motors Co. stock, and that could mean about $1.2 billion more for U.S. taxpayers.

The automaker this morning boosted the expected price of its initial public stock offering to $32 to $33, from the original $26 to $29.

Investors are hoping to get in early on a hoped-for turnaround in GM’s fortunes. And the frenzy is feeding on itself as investors scramble to take part in on one of the year’s hottest stock offerings.

The move raises the value of the IPO to as much as $13.85 billion [a previous version pegged this number at $12 billion], with up to $10 billion of that going to the U.S. government, which bailed out the company last year and currently holds a 61% ownership stake.

[Update]The robust investor demand reportedly also has prompted GM to raise the number of shares being sold by 31%, to 478 million.

Investor frenzies generally haven’t played out well for ordinary Americans -– think of the bear market after the late-1990s dot-com bubble or the bruising recession that followed the nation’s housing crash.

But in this case it could mean an additional $1.2 billion to U.S. taxpayers if the IPO goes off at the full $33 on Thursday.

The government still faces a long road in getting back the nearly $50 billion it spent rescuing GM, but this is a better start than seemed likely not long ago.

-- Walter Hamilton